[Federal Register Volume 81, Number 190 (Friday, September 30, 2016)]
[Rules and Regulations]
[Pages 67598-67724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-22964]



[[Page 67597]]

Vol. 81

Friday,

No. 190

September 30, 2016

Part III

Book 2 of 2 Books

Pages 67597-67900





 Department of Labor





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29 CFR Part 13



 Establishing Paid Sick Leave for Federal Contractors; Final Rule

  Federal Register / Vol. 81 , No. 190 / Friday, September 30, 2016 / 
Rules and Regulations  

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DEPARTMENT OF LABOR

Office of the Secretary

29 CFR Part 13

RIN 1235-AA13


Establishing Paid Sick Leave for Federal Contractors

AGENCY: Wage and Hour Division, Department of Labor.

ACTION: Final rule.

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SUMMARY: This Final Rule issues regulations to implement Executive 
Order 13706, Establishing Paid Sick Leave for Federal Contractors, 
signed by President Barack Obama on September 7, 2015. Executive Order 
13706 requires certain parties that contract with the Federal 
Government to provide their employees with up to 7 days (56 hours) of 
paid sick leave annually, including paid leave allowing for family 
care; it explains that providing access to paid sick leave will improve 
the health and performance of employees of Federal contractors and 
bring their benefits packages in line with model employers, ensuring 
that Federal contractors remain competitive employers and generating 
savings and quality improvements that will lead to improved economy and 
efficiency in Government procurement. The Order directs the Secretary 
of Labor to issue regulations to implement its requirements by 
September 30, 2016. This Final Rule defines terms used in the 
regulatory text, describes the categories of contracts and employees 
the Order covers and excludes from coverage, sets forth requirements 
and restrictions governing the accrual and use of paid sick leave, and 
prohibits interference with or discrimination for the exercise of 
rights under the Executive Order. It also describes the obligations of 
contracting agencies, the Department of Labor, and contractors under 
the Executive Order, and it establishes the standards and procedures 
for complaints, investigations, remedies, and administrative 
enforcement proceedings related to alleged violations of the Order. As 
required by the Order and to the extent practicable, the Final Rule 
incorporates existing definitions, procedures, remedies, and 
enforcement processes under the Fair Labor Standards Act, the Service 
Contract Act, the Davis-Bacon Act, the Family and Medical Leave Act, 
the Violence Against Women Act, and Executive Order 13658, Establishing 
a Minimum Wage for Contractors.

DATES: Effective date: This Final Rule is effective on November 29, 
2016.
    Applicability date: For procurement contracts subject to the 
Federal Acquisition Regulation and Executive Order 13706, this Final 
Rule is applicable only after the effective date of regulations to be 
issued by the Federal Acquisition Regulatory Council. The Department of 
Labor will publish a document in the Federal Register to announce the 
applicability date for such contracts.

FOR FURTHER INFORMATION CONTACT: Robert Waterman, Compliance 
Specialist, Wage and Hour Division, U.S. Department of Labor, Room S-
3510, 200 Constitution Avenue NW., Washington, DC 20210; telephone: 
(202) 693-0406 (this is not a toll-free number). Copies of this Final 
Rule may be obtained in alternative formats (large print, Braille, 
audio tape or disc), upon request, by calling (202) 693-0675 (this is 
not a toll-free number). TTY/TDD callers may dial toll-free 1-877-889-
5627 to obtain information or request materials in alternative formats.
    Questions of interpretation and/or enforcement of the agency's 
regulations may be directed to the nearest Wage and Hour Division (WHD) 
district office. Locate the nearest office by calling the WHD's toll 
free help line at (866) 4US-WAGE ((866) 487-9243) between 8 a.m. and 5 
p.m. in your local time zone, or log onto the WHD's Web site for a 
nationwide listing of WHD district and area offices at http://www.dol.gov/whd/america2.htm.

SUPPLEMENTARY INFORMATION: 

I. Executive Order 13706 Requirements and Background

    On September 7, 2015, President Barack Obama signed Executive Order 
13706, Establishing Paid Sick Leave for Federal Contractors (the 
Executive Order or the Order). 80 FR 54697.
    Section 1 of Executive Order 13706 explains that the Order seeks to 
increase efficiency and cost savings in the work performed by parties 
that contract with the Federal Government by ensuring that employees on 
those contracts can earn up to 7 days or more of paid sick leave 
annually, including paid leave allowing for family care. 80 FR 54697. 
The Order states that providing access to paid sick leave will improve 
the health and performance of employees of Federal contractors and 
bring benefits packages at Federal contractors in line with model 
employers, ensuring that they remain competitive employers in the 
search for dedicated and talented employees. Id. The Order further 
states that these savings and quality improvements will lead to 
improved economy and efficiency in Government procurement. Id. Section 
2 of the Executive Order establishes paid sick leave for Federal 
contractors and subcontractors. 80 FR 54697. Section 2(a) provides that 
executive departments and agencies (agencies) shall, to the extent 
permitted by law, ensure that new contracts, contract-like instruments, 
and solicitations (collectively referred to as ``contracts''), as 
described in section 6 of the Order, include a clause, which the 
contractor and any subcontractors shall incorporate into lower-tier 
subcontracts, specifying, as a condition of payment, that all 
employees, in the performance of the contract or any subcontract 
thereunder, shall earn not less than 1 hour of paid sick leave for 
every 30 hours worked. Id. Section 2(b) prohibits a contractor from 
limiting the total accrual of paid sick leave per calendar year, or at 
any point, at less than 56 hours. Id.
    Section 2(c) explains that paid sick leave earned under the Order 
may be used by an employee for an absence resulting from: (i) Physical 
or mental illness, injury, or medical condition; (ii) obtaining 
diagnosis, care, or preventive care from a health care provider; (iii) 
caring for a child, a parent, a spouse, a domestic partner, or any 
other individual related by blood or affinity whose close association 
with the employee is the equivalent of a family relationship who has 
any of the conditions or needs for diagnosis, care, or preventive care 
described in (i) or (ii) or is otherwise in need of care; or (iv) 
domestic violence, sexual assault, or stalking, if the time absent from 
work is for the purposes described in (i) or (ii), to obtain additional 
counseling, to seek relocation, to seek assistance from a victim 
services organization, or take related legal action, including 
preparation for or participation in any related civil or criminal legal 
proceeding, or to assist an individual related to the employee as 
described in (iii) in engaging in any of these activities. 80 FR 54697.
    Section 2(d) provides that paid sick leave shall carry over from 
one year to the next and shall be reinstated for employees rehired by a 
covered contractor within 12 months after a job separation. Id. Under 
section 2(e), the use of paid sick leave cannot be made contingent on 
the requesting employee finding a replacement to cover any work time to 
be missed. 80 FR 54698. Section 2(f) provides that the paid sick leave 
required by the Order is in addition to a contractor's obligations 
under the Service Contract Act and Davis-Bacon Act, and contractors may 
not receive credit toward their prevailing wage or

[[Page 67599]]

fringe benefit obligations under those Acts for any paid sick leave 
provided in satisfaction of the Order's requirements. Id.
    Section 2(g) provides that an employer's existing paid sick leave 
policy provided in addition to the fulfillment of Service Contract Act 
or Davis-Bacon Act obligations, if applicable, and made available to 
all covered employees will satisfy the requirements of the Executive 
Order if the amount of paid leave is sufficient to meet the 
requirements of section 2 and if it may be used for the same purposes 
and under the same conditions described in the Executive Order. Id.
    Section 2(h) of the Order establishes that paid sick leave shall be 
provided upon the oral or written request of an employee that includes 
the expected duration of the leave, and is made at least 7 calendar 
days in advance where the need for the leave is foreseeable, and in 
other cases as soon as is practicable. Id.
    Section 2(i) addresses when a contractor may require employees to 
provide certification or documentation regarding the use of leave. 80 
FR 54698. It provides that a contractor may only require certification 
issued by a health care provider for paid sick leave used for the 
purposes listed in sections 2(c)(i), (c)(ii), or (c)(iii) for employee 
absences of 3 or more consecutive workdays, to be provided no later 
than 30 days from the first day of the leave. Id. It further provides 
that if 3 or more consecutive days of paid sick leave is used for the 
purposes listed in section 2(c)(iv), documentation may be required to 
be provided from an appropriate individual or organization with the 
minimum necessary information establishing a need for the employee to 
be absent from work. Id. The Executive Order notes that the contractor 
shall not disclose any verification information and shall maintain 
confidentiality about domestic abuse, sexual assault, or stalking, 
unless the employee consents or when disclosure is required by law. Id.
    Section 2(j) states that nothing in the Order shall require a 
covered contractor to make a financial payment to an employee upon a 
separation from employment for unused accrued sick leave. 80 FR 54698. 
Section 2(j) further notes, however, that unused leave is subject to 
reinstatement as prescribed in section 2(d). Id.
    Section 2(k) prohibits a covered contractor from interfering with 
or in any other manner discriminating against an employee for taking, 
or attempting to take, paid sick leave as provided for under the Order, 
or in any manner asserting, or assisting any other employee in 
asserting, any right or claim related to the Order. Id.
    Section 2(l) states that nothing in the Order shall excuse 
noncompliance with or supersede any applicable Federal or State law, 
any applicable law or municipal ordinance, or a collective bargaining 
agreement requiring greater paid sick leave or leave rights than those 
established under the Order. Id.
    Section 3(a) of the Executive Order provides that the Secretary of 
Labor (Secretary) shall issue such regulations by September 30, 2016, 
as are deemed necessary and appropriate to carry out the Order, to the 
extent permitted by law and consistent with the requirements of 40 
U.S.C. 121, including providing exclusions from the requirements set 
forth in the Order where appropriate; defining terms used in the Order; 
and requiring contractors to make, keep, and preserve such employee 
records as the Secretary deems necessary and appropriate for the 
enforcement of the provisions of the Order or the regulations 
thereunder. 80 FR 54698. It also requires that, to the extent permitted 
by law, within 60 days of the Secretary issuing such regulations, the 
Federal Acquisition Regulatory Council (FARC) shall issue regulations 
in the Federal Acquisition Regulation (FAR) to provide for inclusion in 
Federal procurement solicitations and contracts subject to the 
Executive Order the contract clause described in section 2(a) of the 
Order. Id.
    Additionally, section 3(b) states that within 60 days of the 
Secretary issuing regulations pursuant to the Order, agencies shall 
take steps, to the extent permitted by law, to exercise any applicable 
authority to ensure that contracts or contract-like instruments for 
concessions and contracts entered into with the Federal Government in 
connection with Federal property or lands and related to offering 
services for Federal employees, their dependents, or the general 
public, entered into after January 1, 2017, consistent with the 
effective date of such agency action, comply with the requirements set 
forth in section 2 of the Order. 80 FR 54699.
    Section 3(c) specifies that any regulations issued pursuant to 
section 3 of the Order should, to the extent practicable and consistent 
with section 7 of the Order, incorporate existing definitions, 
procedures, remedies, and enforcement processes under the Fair Labor 
Standards Act, 29 U.S.C. 201 et seq. (FLSA); the McNamara-O'Hara 
Service Contract Act, 41 U.S.C. 6701 et seq. (SCA); the Davis-Bacon 
Act, 40 U.S.C. 3141 et seq. (DBA); the Family and Medical Leave Act, 29 
U.S.C. 2601 et seq. (FMLA); the Violence Against Women Act of 1994, 42 
U.S.C. 13925 et seq. (VAWA); and Executive Order 13658, Establishing a 
Minimum Wage for Contractors, 79 FR 9851 (Feb. 20, 2014) (Executive 
Order 13658 or Minimum Wage Executive Order). Id.
    Section 4(a) of the Executive Order grants authority to the 
Secretary to investigate potential violations of and obtain compliance 
with the Order, including the prohibitions on interference and 
discrimination in section 2(k) of the Order. 80 FR 54699. Section 4(b) 
further explains that the Executive Order creates no rights under the 
Contract Disputes Act, and disputes regarding whether a contractor has 
provided employees with paid sick leave prescribed by the Order, to the 
extent permitted by law, shall be disposed of only as provided by the 
Secretary in regulations issued pursuant to the Order. Id.
    Section 5 of the Executive Order establishes that if any provision 
of the Order, or applying such provision to any person or circumstance, 
is held to be invalid, the remainder of the Order and the application 
of the provisions of such to any person or circumstances shall not be 
affected thereby. Id.
    Section 6(a) of the Executive Order provides that nothing in the 
Order shall be construed to impair or otherwise affect (i) the 
authority granted by law to an executive department, agency, or the 
head thereof; or (ii) the functions of the Director of the Office of 
Management and Budget (OMB) relating to budgetary, administrative, or 
legislative proposals. 80 FR 54699. Section 6(b) states that the Order 
is to be implemented consistent with applicable law and subject to the 
availability of appropriations. Id. Section 6(c) explains that the 
Order is not intended to, and does not, create any right or benefit, 
substantive or procedural, enforceable at law or in equity by any party 
against the United States, its departments, agencies, or entities, its 
officers, employees, or agents, or any other person. Id.
    Section 6(d) of the Executive Order establishes that the Order 
shall apply only to a new contract or contract-like instrument, as 
defined by the Secretary in the regulations issued pursuant to section 
3(a) of the Order, if: (i) (A) It is a procurement contract for 
services or construction; (B) it is a contract or contract-like 
instrument for services covered by the Service Contract Act; (C) it is 
a contract or contract-like instrument for concessions, including any 
concessions contract excluded by Department of Labor (the Department) 
regulations at 29 CFR 4.133(b); or (D) it

[[Page 67600]]

is a contract or contract-like instrument entered into with the Federal 
Government in connection with Federal property or lands and related to 
offering services for Federal employees, their dependents, or the 
general public; and (ii) the wages of employees under such contract or 
contract-like instrument are governed by the DBA, SCA, or FLSA, 
including employees who qualify for an exemption from the FLSA's 
minimum wage and overtime provisions. 80 FR 54699.
    Section 6(e) states that, for contracts or contract-like 
instruments covered by the SCA or DBA, the Order shall apply only to 
contracts or contract-like instruments at the thresholds specified in 
those statutes. 80 FR 54699-700. Additionally, Section 6(e) provides 
that for procurement contracts in which employees' wages are governed 
by the FLSA, the Order shall apply only to contracts or contract-like 
instruments that exceed the micro-purchase threshold, as defined in 41 
U.S.C. 1902(a), unless expressly made subject to the Order pursuant to 
regulations or actions taken under section 3 of the Order. 80 FR 54700.
    Section 6(f) specifies that the Order shall not apply to grants; 
contracts and agreements with and grants to Indian Tribes under the 
Indian Self-Determination and Education Assistance Act (Pub. L. 93-
638), as amended; or any contracts or contract-like instruments 
expressly excluded by the regulations issued pursuant to section 3(a) 
of the Order. Id. Section 6(g) strongly encourages independent agencies 
to comply with the Order's requirements. Id.
    Section 7(a) of the Executive Order provides that the Order is 
effective immediately and shall apply to covered contracts where the 
solicitation for such contract has been issued, or the contract has 
been awarded outside the solicitation process, on or after: (i) January 
1, 2017, consistent with the effective date for the action taken by the 
FARC pursuant to section 3(a) of the Order; or (ii) January 1, 2017, 
for contracts where an agency action is taken pursuant to section 3(b) 
of the Order, consistent with the effective date for such action. 80 FR 
54700. Section 7(b) specifies that the Order shall not apply to 
contracts or contract-like instruments that are awarded, or entered 
into pursuant to solicitations issued, on or before the effective date 
for the relevant action taken pursuant to section 3 of the Order. Id.

II. Discussion of Final Rule

A. Legal Authority

    The President issued Executive Order 13706 pursuant to his 
authority under ``the Constitution and the laws of the United States of 
America,'' expressly including 40 U.S.C. 121, a provision of the 
Federal Property and Administrative Services Act (Procurement Act). 80 
FR 54697. The Procurement Act authorizes the President to ``prescribe 
policies and directives that [the President] considers necessary to 
carry out'' the statutory purposes of ensuring ``economical and 
efficient'' government procurement and administration of government 
property. 40 U.S.C. 101, 121(a). Executive Order 13706 delegates to the 
Secretary the authority to issue regulations ``deemed necessary and 
appropriate to carry out this order.'' 80 FR 54698. The Secretary has 
delegated his authority to promulgate these regulations to the 
Administrator of the WHD. Secretary's Order 01-2014 (Dec. 19, 2014), 79 
FR 77527 (published Dec. 24, 2014).

B. Comments Received

    On February 25, 2016, the Department published a Notice of Proposed 
Rulemaking (NPRM) in the Federal Register, inviting public comments on 
a proposal to implement the provisions of Executive Order 13706, which 
were to be submitted by March 28, 2016. See 81 FR 9592. On March 14, 
2016, the Department extended the period for submitting written 
comments until April 12, 2016. See 81 FR 13306.
    More than 35,000 individuals and entities commented on the 
Department's NPRM. Comments were received from a variety of interested 
stakeholders, such as labor organizations; contractors and contractor 
associations; worker advocates; advocacy groups focused on issues 
affecting women, children, seniors, and the LGBT community; Members of 
Congress; local government agencies; small businesses; and workers. The 
vast majority of comments received came from individuals who submitted 
materially identical comments through interested organizations. For 
example, 9,025 individuals submitted essentially identical comments in 
support of, or joined, a comment submitted by the National Partnership 
for Women & Families (National Partnership) in favor of the rule, and 
Organizing for Action submitted a comment in support of the rule signed 
by 20,853 individuals.
    The Department received many comments, such as those submitted by 
the Center for American Progress (CAP), Jobs With Justice, the Service 
Employees International Union (SEIU), the American Federation of Labor 
and Congress of Industrial Organizations (AFL-CIO), the National 
Women's Law Center (NWLC), A Better Balance, North America's Building 
Trades Unions (Building Trades), the National Employment Law Project 
(NELP), Pride at Work, The Leadership Conference on Civil and Human 
Rights, Lambda Legal, Demos, the Center for Law and Social Policy 
(CLASP), and 73 U.S. Senators and Representatives expressing support 
for establishing paid sick leave for employees of Federal contractors. 
For instance, the AFL-CIO agreed with the Order's policy rationale that 
providing access to paid sick leave improves the health and performance 
of Federal contractor employees, and the Leadership Conference on Civil 
and Human Rights wrote that providing paid sick leave means fewer 
employees will be forced to make difficult choices between their jobs 
and their health or the health of their families.
    The Department also received submissions from a number of 
commenters, including the U.S. Chamber of Commerce and the 
International Franchise Association (Chamber/IFA), Associated General 
Contractors of America (AGC), the Professional Services Council (PSC), 
the Equal Employment Advisory Council (EEAC), and Associated Builders 
and Contractors, Inc. (ABC), expressing opposition to the Order, many 
describing its requirements as burdensome for contractors. Some of 
these commenters also questioned the President's authority to issue the 
Order, which is a subject outside the purview of this rulemaking.
    Many commenters expressed reactions to, offered suggestions 
regarding, or posed questions about specific provisions in the proposed 
regulations. The Department will address such comments in the section-
by-section analysis of the Final Rule below.

C. Effective Date

    The Department received comments requesting that the effective date 
of this Final Rule be delayed. AGC requested that the Final Rule apply 
only to contracts resulting from solicitations issued no earlier than 
one year after the date of the rule's publication in the Federal 
Register; the American Benefits Council asked for a ``grace period'' of 
1 year before contractors were responsible for compliance with the 
Order; and TrueBlue, Inc. asked that the rule's effective date be 1 
year after its publication. The General Contractors Association of 
Hawaii, Master Sheet Metal, Inc., and Alan Shintani, Inc. also 
requested a delay in the effective date

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beyond January 1, 2017. Because the Order itself specifically 
designates a date as of which its requirements apply to covered 
contracts, the Department does not believe it is appropriate to 
generally delay its effective date. (A specific, temporary exception 
from the Order's requirements for employees performing work subject to 
the terms of a collective bargaining agreement is discussed in the 
section of this preamble addressing Sec.  13.4.) As such, this Final 
Rule is effective as indicated in the Dates section above, and shall 
apply to covered contracts where the solicitation for such contract has 
been issued, or the contract has been awarded outside the solicitation 
process, on or after January 1, 2017.

D. Discussion of the Final Rule

    After considering all timely and relevant comments received in 
response to the February 25, 2016 NPRM, the Department is issuing this 
Final Rule to implement the provisions of Executive Order 13706. The 
Final Rule, which amends Title 29 of the Code of Federal Regulations 
(CFR) by adding part 13, establishes standards and procedures for 
implementing and enforcing Executive Order 13706. Subpart A of part 13 
addresses general matters, including the purpose and scope of the rule, 
sets forth definitions of terms used in part 13, and describes the 
types of contracts and employees covered by the Order and part 13 and 
excluded from such coverage. It describes the paid sick leave 
requirements for contractors established by the Executive Order, 
including rules and restrictions regarding the accrual and use of such 
leave. It also prohibits interference with the accrual or use of paid 
sick leave provided pursuant to the Executive Order or part 13 and 
discrimination for the exercise of rights under the Executive Order or 
part 13, and it addresses failure to comply with the recordkeeping 
requirements of part 13. Finally, subpart A includes a prohibition 
against waiver of rights and a new provision regarding multiemployer 
plans and other plans, funds, or programs to provide paid sick leave.
    Subpart B establishes the obligations of the Federal Government 
(specifically, contracting agencies and the Department) under the 
Order, and subpart C establishes the obligations of contractors under 
the Order, including recordkeeping requirements. Subparts D and E 
specify standards and procedures related to alleged violations of the 
Order and part 13, including complaint intake, investigations, 
remedies, and administrative enforcement proceedings. Appendix A 
contains a contract clause to implement Executive Order 13706.
    The following section-by-section discussion of this Final Rule 
presents the contents of each section in more detail, summarizes and 
responds to comments received about specific provisions, and describes 
the Final Rule as adopted, including by noting and explaining 
modifications from the proposed rule.
Subpart A--General
    Subpart A of part 13 summarizes the purpose of the rule, defines 
terms used in the rule, describes the types of contracts and employees 
covered by and excluded from the rule, and sets forth rules and 
restrictions regarding the accrual and use of paid sick leave. Subpart 
A also prohibits interference with the accrual or use of the paid sick 
leave required by, and discrimination for the exercise of rights under, 
the Executive Order or part 13, as well as violations of the 
recordkeeping requirements of part 13. Additionally, subpart A includes 
a prohibition against waiver of rights and a new provision regarding 
multiemployer plans and other plans, funds, or programs to provide paid 
sick leave.
Section 13.1 Purpose and Scope
    Proposed Sec.  13.1(a) explained that the purpose of the rule is to 
implement Executive Order 13706 and reiterated statements from the 
Order that the Federal Government's procurement interests in economy 
and efficiency are promoted when the Federal Government contracts with 
sources that provide paid sick leave to their employees. It explained 
that the Order states that providing access to paid sick leave will 
improve the productivity of employees by improving their health and 
performance and will bring benefits packages offered by Federal 
contractors in line with model employers, ensuring they remain 
competitive in the search for dedicated and talented employees. 
Proposed Sec.  13.1(a) stated that it is for these reasons that the 
Executive Order concludes that the provision of paid sick leave under 
the Order will generate savings and quality improvements in the work 
performed by parties who contract with the Federal Government, thereby 
leading to improved economy and efficiency in Government procurement. 
The Department believes that, by increasing the quality and efficiency 
of services provided to the Federal Government, the Executive Order 
will improve the value that taxpayers receive from the Federal 
Government's investment. The Department did not receive comments 
regarding Sec.  13.1(a) in particular, and, as noted above, comments 
questioning the President's authority to issue Executive Order 13706 
are outside of the scope of this rulemaking. This provision is 
therefore adopted as proposed.
    Proposed Sec.  13.1(b) set forth the general position of the 
Federal Government that providing access to paid sick leave on Federal 
contracts will increase efficiency and cost savings for the Federal 
Government, and it explained the general requirement established in 
Executive Order 13706 that new contracts with the Federal Government 
include a clause, which the contractor and any subcontractors shall 
incorporate into lower-tier subcontracts, requiring, as a condition of 
payment, that the contractor and any subcontractors provide paid sick 
leave to employees in the amount of not less than 1 hour of paid sick 
leave for every 30 hours worked on or in connection with covered 
contracts. The final sentence of proposed Sec.  13.1(b) also specified 
that nothing in Executive Order 13706 or part 13 would excuse 
noncompliance with or supersede any applicable Federal or State law, 
any applicable law or municipal ordinance, or a collective bargaining 
agreement (CBA) requiring greater paid sick leave or leave rights than 
those established under the Order or part 13. The Department did not 
receive comments regarding Sec.  13.1(b) and adopts the provision 
largely as proposed, except for one change that has no substantive 
effect: Deletion of the final sentence, because identical language 
appears in Sec.  13.5(f)(1).
    Proposed Sec.  13.1(c) outlined the scope of the proposed rule and 
provided that neither Executive Order 13706 nor part 13 created any 
rights under the Contract Disputes Act or created any private right of 
action. As noted in the NPRM, the Department does not interpret the 
Executive Order as limiting existing rights under the Contract Disputes 
Act. Proposed Sec.  13.1(c) also implemented the directive in section 
4(b) of the Order that disputes regarding whether a contractor has 
provided paid sick leave as prescribed by the Order, to the extent 
permitted by law, shall be disposed of only as provided by the 
Secretary in regulations issued under the Order. The proposed provision 
specified, however, that nothing in the Order or part 13 was intended 
to limit or preclude a civil action under the False Claims Act, 31 
U.S.C. 3730, or criminal prosecution under 18 U.S.C. 1001. Finally, 
this proposed paragraph specified that neither the Order nor part 13 
would preclude judicial review of final decisions by the Secretary in 
accordance

[[Page 67602]]

with the Administrative Procedure Act, 5 U.S.C. 701 et seq. No 
commenters addressed this provision, and the Department adopts it as 
proposed.
Section 13.2 Definitions
    Proposed Sec.  13.2 defined terms for purposes of part 13. Section 
3(c) of the Executive Order instructs that any regulations issued 
pursuant to the Order should ``incorporate existing definitions'' under 
the FLSA, SCA, DBA, FMLA, VAWA, and Executive Order 13658 ``to the 
extent practicable and consistent with section 7 of this order.'' 80 FR 
54699. Because of the similarities in language, structure, and intent 
of the Minimum Wage Executive Order and Executive Order 13706, many of 
the definitions provided in the proposed rule were identical to or 
based on definitions promulgated in the Minimum Wage Executive Order 
Final Rule, which in turn were largely based on the definitions of 
relevant terms set forth in the statutory text or implementing 
regulations of the FLSA, SCA, or DBA. In addition, some definitions 
were based on definitions published by the FARC in section 2.101 of the 
FAR, 48 CFR 2.101, and others were based on definitions set forth in 
the Department's regulations implementing Executive Order 13495, 
Nondisplacement of Qualified Workers Under Service Contracts (Executive 
Order 13495 or Nondisplacement Executive Order), at 29 CFR 9.2. 79 FR 
60637. Definitions in the proposed rule that were relevant because of 
provisions of Executive Order 13706 that do not appear in Executive 
Order 13658 were largely based on definitions set forth in the 
statutory text or implementing regulations of the FMLA or the VAWA, as 
well as regulations issued by the U.S. Office of Personnel Management 
(OPM) at 5 CFR part 630, subparts B and D, which govern the accrual and 
use of sick leave by employees of the Federal Government.
    As explained in the NPRM, the definitions discussed below will 
govern the implementation and enforcement of Executive Order 13706. 
Nothing in this Final Rule is intended to alter the meaning of or to be 
interpreted inconsistently with the definitions set forth in section 
2.101 of the FAR for purposes of that regulation.
    The Department proposed to define accrual year to mean the 12-month 
period during which a contractor may limit an employee's accrual of 
paid sick leave to no less than 56 hours. No commenters suggested 
revising this definition, and it is adopted as proposed.
    The Department proposed to define the term Administrative Review 
Board as the Administrative Review Board within the U.S. Department of 
Labor. The Department received no comments addressing this definition, 
and it is adopted as proposed.
    The Department proposed to define the term Administrator to mean 
the Administrator of the Wage and Hour Division and to include any 
official of the Wage and Hour Division authorized to perform any of the 
functions of the Administrator under part 13. The Department received 
no comments regarding this definition and adopts it as proposed.
    The Department proposed to define as soon as is practicable to mean 
as soon as both possible and practical, taking into account all of the 
facts and circumstances of the individual case. This definition was 
derived from the definition of ``as soon as practicable'' in the FMLA 
regulations. 29 CFR 825.302(b). Although the Department received 
comments regarding the application of this term, as described in the 
discussion of Sec.  13.5(d) below, the Department did not receive 
comments requesting changes to this definition and therefore implements 
it without modification.
    The Department proposed to define certification issued by a health 
care provider as any type of written document created or signed by a 
health care provider (or by a representative of the health care 
provider) that contains information verifying the existence of the 
physical or mental illness, injury, medical condition, or need for 
diagnosis, care, or preventive care or other need for care referred to 
in proposed Sec.  13.5(c)(1)(i), (ii), or (iii). The proposed 
definition allowed employees to provide as certification a greater 
range of documents than would suffice to demonstrate the existence of a 
serious health condition for purposes of the FMLA. See 29 CFR 825.305, 
825.306. For example, under the proposal, a note from a hospital nurse 
stating that an employee needed surgery and would require at least 3 
days to recover before returning to work would meet the definition, as 
would a note from an employee's parent's doctor stating that the parent 
needs daily assistance with tasks such as dressing and eating. EEAC 
commented that employees should be required to provide as much 
information to certify the use of paid sick leave as is necessary to 
certify the use of FMLA leave; on the other hand, the Center for 
WorkLife Law at the University of California, Hastings College of Law 
(Center for WorkLife Law) commented that the Department should require 
no specificity in the certification beyond the fact that a medical or 
health condition exists, because such a statement is sufficient to 
prevent employee abuse of leave and would avoid inviting the contractor 
to inappropriately evaluate whether a particular condition justifies 
the use of paid sick leave. The Department declines to adopt either 
suggestion. With respect to EEAC's comment, the Department notes that 
the reasons for which an employee may use FMLA leave are significantly 
more limited than the permissible uses of paid sick leave under the 
Order and part 13, and it is therefore logical that the information 
required to justify the use of FMLA leave correspondingly reflects a 
higher threshold than is called for in using paid sick leave. But 
neither does the Department agree that a simple statement that an 
employee (or an employee's family member) has a medical or health issue 
would constitute the type of certification contemplated in the 
Executive Order. As the examples above indicate, the Department 
believes that great specificity regarding the medical or health issue 
is not required; a health care provider's note referring to surgery 
need not explain what condition the surgery treated or the specifics of 
the procedure, and a note from a doctor regarding a physical or mental 
condition (such as a broken leg or dementia) that causes a need for 
caretaking need not provide specific details about the parent's 
condition or the specific tasks with which assistance is required.
    In the discussion of this definition in the NPRM, the Department 
noted that a contractor could not require that an employee or the 
individual for whom the employee is caring have seen the health care 
provider in person in order to accept the certification. The Department 
did not receive comments regarding this interpretation. For purposes of 
clarity, it has included language in the final regulatory text making 
the point that the health care provider (or representative) need not 
have seen the employee or individual in person in order to create a 
valid certification.
    In the NPRM, the Department proposed to define child to mean (1) a 
biological, adopted, step, or foster son or daughter of the employee; 
(2) a person who is a legal ward or was a legal ward of the employee 
when that individual was a minor or required a legal guardian; (3) a 
person for whom the employee stands in loco parentis or stood in loco 
parentis when that individual was a minor or required someone to stand 
in loco parentis; or (4)

[[Page 67603]]

a child, as described in paragraphs (1) through (3) of the definition, 
of an employee's spouse or domestic partner. The NPRM explained that 
this definition was adopted from the definition of ``son or daughter'' 
in the OPM regulations governing leave for Federal employees. 5 CFR 
630.201(b). The Department noted that the proposed definition was 
deliberately broader than the definition of ``son or daughter'' in the 
FMLA, which includes only minor children or adult children ``incapable 
of self-care because of a mental or physical disability.'' 29 CFR 
825.102. As the Department explained in the NPRM, the terms of the 
Executive Order make clear that employees are to be permitted to use 
paid sick leave for a broader range of purposes than those for which 
they can use FMLA leave, and one such more expansive use is to care for 
an employee's child of any age.
    EEAC commented that the Department should use as its definition of 
``child'' the definition of ``son or daughter'' from the FMLA, 
asserting that an employee should not be able to use paid sick leave to 
care for adult children who are not incapable of self-care or the child 
of a spouse or domestic partner who is not also the employee's child. A 
comment from scholars affiliated with the Williams Institute at the 
UCLA School of Law, however, specifically supported the definition's 
inclusion of a child who is the employee's spouse or domestic partner's 
son or daughter but not legally recognized as the employee's child. 
Because the Department interprets the list of family members for whom 
an employee may use paid sick leave to care in section 2(c)(iii) of the 
Order as being deliberately broad and inclusive, see 80 FR 54697 
(permitting the use of paid sick leave to care for ``a child, a parent, 
a spouse, a domestic partner, or any other individual related by blood 
or affinity whose close association with the employee is the equivalent 
of a family relationship'')--and in particular because the list so 
plainly deviates from the more limited list in the FMLA, see 29 U.S.C. 
2612(a)(1)(C) (permitting the use of FMLA leave ``to care for the 
spouse, or a son, daughter, or parent, of the employee'')--the 
Department adopts the inclusive definition of child as proposed.
    The Department proposed a definition of concessions contract or 
contract for concessions identical to the definition of those terms in 
the Minimum Wage Executive Order Final Rule. See 79 FR 60722 (codified 
at 29 CFR 10.2). Specifically, the Department proposed to define the 
term as a contract under which the Federal Government grants a right to 
use Federal property, including land or facilities, for furnishing 
services, and included as examples of such contracts those the 
principal purpose of which is to furnish food, lodging, automobile 
fuel, souvenirs, newspaper stands, and/or recreational equipment. The 
Department noted that the proposed definition was not limited based on 
the beneficiary of the services but rather that it encompassed 
contracts regardless of whether they are of direct benefit to the 
Federal Government, its property, its civilian or military personnel, 
or the general public. See 29 CFR 4.133; see also 79 FR 60638. The NPRM 
noted that the proposed definition included, but was not limited to, 
all concessions contracts excluded by Departmental regulations under 
the SCA at 29 CFR 4.133(b). See 79 FR 60638. No commenters addressed 
the definition of concessions contract or contract for concessions, and 
the Department adopts the definition as proposed.
    The Department proposed to define contract and contract-like 
instrument collectively for purposes of the Executive Order in the same 
manner as it did in the Minimum Wage Executive Order implementing 
regulations. See 79 FR 60722 (codified at 29 CFR 10.2). Specifically, 
the NPRM defined a contract or contract-like instrument as an agreement 
between two or more parties creating obligations that are enforceable 
or otherwise recognizable at law. The proposed definition included, but 
was not limited to, a mutually binding legal relationship obligating 
one party to furnish services (including construction) and another 
party to pay for them. The proposed definition of the term contract 
broadly included all contracts and any subcontracts of any tier 
thereunder, whether negotiated or advertised, including any procurement 
actions, lease agreements, cooperative agreements, provider agreements, 
intergovernmental service agreements, service agreements, licenses, 
permits, or any other type of agreement, regardless of nomenclature, 
type, or particular form, and whether entered into verbally or in 
writing. The proposed definition of the term contract was interpreted 
broadly to include, but not be limited to, any contract that may be 
consistent with the definition provided in the FAR or applicable 
Federal statutes. The proposed definition further included, but was not 
limited to, any contract that may be covered under any Federal 
procurement statute. The Department specifically noted in the proposed 
definition that contracts may be the result of competitive bidding or 
awarded to a single source under applicable authority to do so. The 
proposed definition also explained that, in addition to bilateral 
instruments, contracts included, but were not limited to, awards and 
notices of awards; job orders or task letters issued under basic 
ordering agreements; letter contracts; orders, such as purchase orders, 
under which the contract becomes effective by written acceptance or 
performance; and bilateral contract modifications. The proposed 
definition also specified that the term contract included contracts 
covered by the SCA, contracts covered by the DBA, concessions contracts 
not subject to the SCA, and contracts in connection with Federal 
property or lands and related to offering services for Federal 
employees, their dependents, or the general public. As explained in the 
Minimum Wage Executive Order rulemaking, the proposed definition of 
contract was derived from the definition of the term contract set forth 
in Black's Law Dictionary (9th ed. 2009) and section 2.101 of the FAR 
(48 CFR 2.101), as well as the descriptions of the term contract that 
appear in the SCA's regulations at 29 CFR 4.110-4.111 and 4.130. See 79 
FR 60638-41.
    The Department's proposal deliberately adopted a broad definition 
of this term, but noted that the mere fact that a legal instrument 
constitutes a contract would not mean that such contract is subject to 
the Executive Order. In order for a contract to be covered by the 
Executive Order and part 13, the contract must (1) qualify as a 
contract or contract-like instrument; (2) fall within one of the 
specifically enumerated types of contracts set forth in section 6(d)(i) 
of the Order and Sec.  13.3; and (3) be a new contract. Therefore, the 
NPRM explained that, for example, although a cooperative agreement was 
a contract under the Department's proposed definition, a cooperative 
agreement would not be covered by the Executive Order and part 13 
unless it was a new contract and was subject to the SCA or DBA, was a 
concessions contract, or was entered into in connection with Federal 
property or lands and related to offering services for Federal 
employees, their dependents, or the general public.
    The Department did not receive any comments requesting a change to 
this proposed definition, and it therefore adopts it as proposed. One 
commenter, Bodman PLC, asked for clarification of whether, based on the 
broad definition of contract, a financial institution that holds 
deposits insured by the Federal Deposit Insurance Corporation or the 
National Credit Union Administration would be covered by the Order and 
part 13. A contract with the Federal

[[Page 67604]]

Government is not covered by the Order and this rulemaking unless it is 
one of the types of covered contracts named in the Order and further 
described in Sec.  13.3 and the accompanying explanation in this 
preamble. Unless the types of agreements to which the commenter 
referred are procurement contracts for construction covered by the DBA, 
contracts for services covered by the SCA, contracts for concessions, 
or contracts in connection with Federal property or lands and related 
to offering services for Federal employees, their dependents, or the 
general public, the Order does not cover them. Furthermore, as 
explained below, with respect to the fourth category of covered 
contracts, the Department does not interpret ``Federal property'' to 
encompass money, and therefore purely financial transactions with the 
Federal Government are not covered by the Order or part 13.
    The Department proposed to define contracting officer based on the 
definition used in 29 CFR 10.2, issued pursuant to the Minimum Wage 
Executive Order, which in turn was adopted from the definition in 
section 2.101 of the FAR. See 79 FR 60641 (citing 48 CFR 2.101). As 
proposed, the term meant a representative of an executive department or 
agency with the authority to enter into, administer, and/or terminate 
contracts and make related determinations and findings. The term also 
included certain authorized representatives of the contracting officer 
acting within the limits of their authority as delegated by the 
contracting officer. The Department received no comments regarding this 
definition and adopts it as proposed.
    The Department proposed to define contractor to mean any individual 
or other legal entity that is awarded a Federal Government contract or 
a subcontract under a Federal Government contract. The proposed 
definition referred to both a prime contractor and all of its first- or 
lower-tier subcontractors on a contract with the Federal Government. It 
also included lessors and lessees. The Department noted that the term 
employer was used interchangeably with the terms contractor and 
subcontractor in part 13. The proposed definition also explained that 
the U.S. Government, its agencies, and its instrumentalities are not 
considered contractors, subcontractors, employers, or joint employers 
for purposes of compliance with the provisions of Executive Order 
13706. The proposed definition, which was derived from the definition 
adopted in the Minimum Wage Executive Order rulemaking, see 79 FR 60722 
(codified at 29 CFR 10.2), incorporated relevant aspects of the 
definitions of the term contractor in section 9.403 of the FAR, see 48 
CFR 9.403; the SCA regulations at 29 CFR 4.1a(f); and the Department's 
regulations implementing the Nondisplacement Executive Order at 29 CFR 
9.2. The proposed definition differed from the Minimum Wage Executive 
Order only in that it did not refer to employers of employees 
performing work on covered Federal contracts whose wages are computed 
pursuant to special certificates issued under 29 U.S.C. 214(c). The 
Department noted in the NPRM that although such employers would be 
contractors for purposes of Executive Order 13706, such a reference was 
not called for in the proposed definition because, unlike the Minimum 
Wage Executive Order, this Order does not contain any explicit 
reference to employees whose wages are computed pursuant to section 
14(c) certificates. No commenters addressed this definition, and it is 
adopted as proposed.
    The Department proposed to define the term Davis-Bacon Act to mean 
the Davis-Bacon Act of 1931, as amended, 40 U.S.C. 3141 et seq., and 
its implementing regulations. This definition is adopted as proposed.
    The Department proposed to define the term domestic partner to mean 
an adult in a committed relationship with another adult. The proposed 
definition included both same-sex and opposite-sex relationships. The 
Department proposed to further explain that a committed relationship 
was one in which the employee and the domestic partner of the employee 
are each other's sole domestic partner (and are not married to or 
domestic partners with anyone else) and share responsibility for a 
significant measure of each other's common welfare and financial 
obligations. The proposed definition included, but was not limited to, 
any relationship between two individuals of the same or opposite sex 
that is granted legal recognition by a State or by the District of 
Columbia as a marriage or analogous relationship (including, but not 
limited to, a civil union). The proposed definition was adopted from 
the definitions of ``domestic partner'' and ``committed relationship'' 
in the OPM regulations regarding the use of sick leave by Federal 
employees. 5 CFR 630.201(b).
    The Department received a number of comments, including from Pride 
at Work, the Los Angeles LGBT Center, CAP, and Lambda Legal, largely 
supporting this proposed definition but also asking that it be 
clarified. Specifically, these organizations wrote that they have ``a 
concern regarding the requirement that domestic partners share 
responsibility for a significant measure of each other's financial 
obligations'' because for many couples, only one individual earns an 
income that supports both partners, and ``the regulations should be 
clear that such couples are not excluded from the definition of 
domestic partners or committed relationship solely because only one 
partner earns income that they both depend upon.'' The Department did 
not intend its proposed definition to imply that only if both members 
of a couple earn an income would that couple be considered domestic 
partners. Rather, the language regarding sharing responsibility for 
financial obligations could refer to a variety of circumstances, such 
as but not limited to one member of the couple paying for the housing 
and other necessities of the other, the couple having joint bank 
accounts, the couple sharing significant expenses, and/or the couple 
being jointly responsible for financial obligations such as mortgage or 
other loan payments. In other words, rather than calling for any 
particular financial arrangement, the financial interdependence clause 
of the definition is meant to indicate that the couple's financial 
situation reflects that the relationship is a committed one, rather 
than, for example, a casual roommate situation. See Final Rule, Absence 
and Leave; Definitions of Family Member, Immediate Relative, and 
Related Terms, 75 FR 33491, 33493-94 (June 14, 2010) (OPM's discussion 
of the term ``committed relationship,'' noting that its definition 
``would preclude casual roommates from qualifying as each other's 
domestic partner''). Because the Department's language is consistent 
with OPM's and does not have the meaning about which the commenters 
were concerned, the Department adopts the definition of domestic 
partner as proposed.
    The Department proposed to define domestic violence as (1) felony 
or misdemeanor crimes of violence (including threats or attempts) 
committed: (i) by a current or former spouse, domestic partner, or 
intimate partner of the victim; (ii) by a person with whom the victim 
shares a child in common; (iii) by a person who is cohabitating with or 
has cohabitated with the victim as a spouse, domestic partner, or 
intimate partner; (iv) by a person similarly situated to a spouse of 
the victim under domestic or family violence laws of the jurisdiction 
in which the victim resides or the events occurred; or (v) by any other 
adult person against a victim who is protected

[[Page 67605]]

from that person's acts under the domestic or family violence laws of 
the jurisdiction in which the victim resides or the events occurred. 
Under the proposed definition, domestic violence also included (2) any 
crime of violence considered to be an act of domestic violence 
according to State law. This definition was derived from the VAWA, 42 
U.S.C. 13925(a)(8), and its implementing regulations, 28 CFR 90.2(a). 
In its comment, the Women's Law Project expressed concern that this 
definition only refers to acts that are considered to be domestic 
violence for purposes of criminal laws rather than also including acts 
that constitute domestic violence for purposes of civil laws, in 
particular those allowing for civil protection orders. Because the 
Department did not intend for this definition to be narrow or exclude 
any subset of victims of acts that a State considers to constitute 
domestic violence, it is adopting the definition with the revisions 
suggested by the Women's Law Project. Specifically, in the fourth and 
fifth lines of the first part of the definition, the Department is 
inserting ``civil or criminal'' before ``domestic and family violence 
laws,'' and in the second part of the definition, the Department is 
replacing ``according to State law'' with ``under the civil or criminal 
domestic or family violence laws of the jurisdiction in which the 
victim resides or the events occurred,'' the same phrase used in the 
first part of the definition.
    The Department proposed to define employee similarly to the way the 
term worker was used in the Minimum Wage Executive Order rulemaking, 
see 79 FR 60723, but with some differences reflecting the differences 
in the text of that Executive Order and Executive Order 13706. As 
proposed, the term meant any person engaged in performing work on or in 
connection with a contract covered by the Executive Order, and whose 
wages under such contract are governed by the SCA, DBA, or FLSA, 
including employees who qualify for an exemption from the FLSA's 
minimum wage and overtime provisions, regardless of the contractual 
relationship alleged to exist between the individual and the employer. 
Furthermore, the term employee included any person performing work on 
or in connection with a covered contract and individually registered in 
a bona fide apprenticeship or training program registered with the U.S. 
Department of Labor's Employment and Training Administration, Office of 
Apprenticeship, or with a State Apprenticeship Agency recognized by the 
Office of Apprenticeship.
    Much of this proposed definition came directly from section 
6(d)(ii) of the Executive Order, and much of it was identical to the 
definition of worker in the Minimum Wage Executive Order regulations. 
The most significant difference between the proposed definition of 
employee and the Minimum Wage Executive Order rulemaking's definition 
of worker was the inclusion of employees who qualify for an exemption 
from the FLSA's minimum wage and overtime provisions, such as employees 
employed in a bona fide executive, administrative, or professional 
capacity, as those terms are defined in 29 CFR part 541. Comments 
regarding the application of the Order and part 13 to such employees 
are addressed below, in the discussion of coverage of employees under 
Sec.  13.3; for the reasons explained there, the Department adopts the 
relevant portion of this definition as proposed.
    The proposed definition also emphasized, as had been explained in 
the Minimum Wage Executive Order rulemaking, the well-established 
principle under the DBA, SCA, and FLSA that employee coverage does not 
depend upon the existence or form of any contractual relationship that 
may be alleged to exist between the contractor or subcontractor and 
such persons. See 79 FR 60644 (citing 29 U.S.C. 203(d), (e)(1), (g) 
(FLSA); 41 U.S.C. 6701(3)(B), 29 CFR 4.155 (SCA); 29 CFR 5.5(a)(1)(i) 
(DBA)). As reflected in the proposed definition, the Executive Order is 
intended to apply to a wide range of employment relationships. Neither 
an individual's subjective belief about his or her employment status 
nor the existence of a contractual relationship is determinative of 
whether an employee is covered by the Executive Order.
    EEAC and AGC remarked on the breadth of the proposed rule's 
statements about coverage of independent contractors, and AGC, Master 
Sheet Metal, Inc., General Contractors Association of Hawaii, and 
TrueBlue, Inc. specifically requested clarification that the rule does 
not apply to independent contractor owner-operators or sole proprietors 
to the extent they are not subject to SCA or DBA prevailing wage 
requirements. Although the Department reiterates its statement that 
allegations of a contractual relationship or the existence of a 
contract are not determinative of whether a worker is an employee or an 
independent contractor, it clarifies its statements about the effect of 
a worker being properly categorized as an independent contractor here. 
Whether a worker is an ``employee'' or an ``independent contractor'' as 
those terms are often used in other contexts is not material to whether 
that worker is a service employee for purposes of the SCA or a laborer 
or mechanic for purposes of the DBA. See, e.g., 29 CFR 4.155 (SCA); 29 
CFR 5.5(a)(1)(i) (DBA); In re Igwe, ARB Case No. 07-120, 2009 WL 
4324725, at *3-4 (Nov. 25, 2009) (rejecting an argument that ``the 
individuals working on the four contracts were not entitled to SCA 
prevailing wages and fringe benefits because they were independent 
contractors, not employees'' because ``the relevant inquiry is whether 
the persons working on the contract come within the SCA definition of 
`service employee''' and explaining ``the irrelevance of `contractual 
relationship' to that definition''). Because even workers who are 
independent contractors may be covered by the SCA and DBA, those 
workers, if so covered, are employees for purposes of the Order and 
part 13. A worker who is not a service employee for purposes of the SCA 
or a laborer or mechanic for purposes of the DBA and who is not an 
employee under the FLSA, however, is not covered by the Order or part 
13. (The Department notes that an employee who qualifies for an 
exemption from the FLSA's minimum wage and overtime requirements is 
still an employee rather than an independent contractor; as explained 
elsewhere, employees who qualify for such exemptions are covered by the 
Order and part 13.) More specifically, owner-operators (such as owner-
operator truck drivers) and sole proprietors are not covered by the 
Executive Order and part 13 to the extent they are not entitled to 
prevailing wages under the DBA or SCA and are properly classified as 
independent contractors whose wages are not governed by the FLSA. The 
Department's guidance regarding the classification of workers as 
independent contractors under the FLSA is available on the WHD Web 
site, http://www.dol.gov/whd.
    The proposed definition's inclusion of any person performing work 
on or in connection with a covered contract and individually registered 
in a bona fide apprenticeship or training program registered with the 
Department's Employment and Training Administration, Office of 
Apprenticeship, or with a State Apprenticeship Agency recognized by the 
Office of Apprenticeship, was similarly in keeping with the Minimum 
Wage Executive Order's adoption of

[[Page 67606]]

those provisions from the SCA and DBA regulations. See 79 FR 60644 
(citing 29 CFR 4.6(p) (SCA); 29 CFR 5.2(n) (DBA)). The Department 
received no comments regarding this portion of the proposed definition 
and has adopted it as proposed.
    The Department noted in the NPRM that, because unlike the Minimum 
Wage Executive Order, Executive Order 13706 makes no reference to 
individuals performing work on or in connection with a covered contract 
whose wages are calculated pursuant to special certificates issued 
under 29 U.S.C. 214(c), that category of employees was not explicitly 
mentioned in the proposed definition. It further explained that such 
individuals would nevertheless plainly fall within the definition of 
employee for purposes of this rulemaking because their wages are 
governed by the FLSA. The AFL-CIO and SEIU supported the Department's 
inclusion of such workers, and the Department makes no change to this 
implication of the definition.
    Finally, the Department has added language to this definition 
explaining the meaning of working ``on or in connection with'' a 
covered contract. Specifically, the definition now provides that an 
employee performs ``on'' a contract if the employee directly performs 
the specific services called for by the contract and that an employee 
performs ``in connection with'' a contract if the employee's work 
activities are necessary to the performance of a contract but are not 
the specific services called for by the contract. As noted in the more 
detailed discussion below of employee coverage as provided for in Sec.  
13.3, these concepts were explained in the NPRM but were not included 
in the regulatory text itself.
    The Department proposed to define executive departments and 
agencies for purposes of this rulemaking by adopting the definition of 
that term used in the Minimum Wage Executive Order rulemaking, which 
was derived from the definition of executive agency provided in section 
2.101 of the FAR, 48 CFR 2.101. 79 FR 60642, 60722 (codified at 29 CFR 
10.2). The Department therefore proposed to interpret the Executive 
Order to apply to executive departments within the meaning of 5 U.S.C. 
101, military departments within the meaning of 5 U.S.C. 102, 
independent establishments within the meaning of 5 U.S.C. 104(1), and 
wholly owned Government corporations within the meaning of 31 U.S.C. 
9101. The Department did not interpret this definition as including the 
District of Columbia or any Territory or possession of the United 
States.
    Bredhoff & Kaiser, PLLC submitted a comment on behalf of the 
National Postal Mail Handlers Union urging the Department to ensure 
that the Executive Order and part 13 apply to covered contracts with 
the U.S. Postal Service. Although the proposed rule did not identify 
any particular entities that would or would not have qualified as 
executive departments and agencies, its definition of that term 
referred to, among other types of entities, independent establishments 
within the meaning of 5 U.S.C. 104(1). That statutory provision 
expressly excludes the U.S. Postal Service.
    The Department agrees with the commenter that the Executive Order, 
which contains no indication that the U.S. Postal Service is not among 
the governmental entities the contracts of which may be covered, is 
best interpreted to apply to covered contracts with the U.S. Postal 
Service. The Minimum Wage Executive Order rulemaking did not address 
the implications of its adoption of the FAR's definition of executive 
departments and agencies, including its reference to independent 
establishments within the meaning of 5 U.S.C. 104(1) generally or 
coverage of the U.S. Postal Service specifically; there is no 
indication in the rulemaking that any commenter asked that the 
Department expand coverage to the U.S. Postal Service or that doing so 
would have had practical effect. The terms of Executive Order 13706 (as 
well as Executive Order 13658) indicate that contracts with the Federal 
Government covered by the SCA are covered by the Order, and it is clear 
that under the SCA, service contracts with the Federal Government 
covered by that Act include contracts with the U.S. Postal Service 
unless they are expressly excluded. See, e.g., 41 U.S.C. 6702(b)(7) 
(``This chapter does not apply to . . . a contract with the United 
States Postal Service, the principal purpose of which is the operation 
of postal contract stations.''). It is therefore appropriate to infer 
that the Executive Order was intended to apply to covered contracts 
with the U.S. Postal Service. Furthermore, the purpose of the Executive 
Order--ensuring that employees working on or in connection with covered 
contracts have access to paid sick leave--is best served by modifying 
the proposed definition to make clear that coverage extends to covered 
contracts with the U.S. Postal Service. Accordingly, the Department has 
expanded the definition of executive departments and agencies to refer 
to independent establishments not only within the meaning of 5 U.S.C. 
104(1), but also within the meaning of 39 U.S.C. 201, which establishes 
the U.S. Postal Service ``as an independent establishment of the 
executive branch of the Government of the United States.''
    The Department proposed to define Executive Order 13495 or 
Nondisplacement Executive Order to mean Executive Order 13495 of 
January 30, 2009, Nondisplacement of Qualified Workers Under Service 
Contracts, 74 FR 6103 (Feb. 4, 2009), and its implementing regulations 
at 29 CFR part 9. This definition is adopted as proposed.
    The Department proposed to define Executive Order 13658 or Minimum 
Wage Executive Order to mean Executive Order 13658 of February 12, 
2014, Establishing a Minimum Wage for Contractors, 79 FR 9851 (Feb. 20, 
2014), and its implementing regulations at 29 CFR part 10. This 
definition is adopted as proposed.
    The Department proposed to define Fair Labor Standards Act as the 
Fair Labor Standards Act of 1938, as amended, 29 U.S.C. 201 et seq., 
and its implementing regulations. This definition is adopted as 
proposed.
    The Department proposed to define Family and Medical Leave Act as 
the Family and Medical Leave Act of 1993, as amended, 29 U.S.C. 2601 et 
seq., and its implementing regulations. This definition is adopted as 
proposed.
    The Department proposed to define family violence, a term used in 
the definition of domestic violence, to mean any act or threatened act 
of violence, including any forceful detention of an individual that 
results or threatens to result in physical injury and is committed by a 
person against another individual (including an elderly individual) to 
or with whom such person is related by blood, is or was related by 
marriage or is or was otherwise legally related, or is or was lawfully 
residing. Because the VAWA does not provide a definition of the term, 
this definition was adopted from the definition of ``family violence'' 
in the Family Violence Prevention and Services Act, 42 U.S.C. 10401. 
See 42 U.S.C. 10402(4). The Department did not receive any comments 
regarding this definition and therefore adopts it as proposed.
    Proposed Sec.  13.2 defined Federal Government as an agency or 
instrumentality of the United States that enters into a contract 
pursuant to authority derived from the Constitution or the laws of the 
United States. The proposed definition was identical to that used in 
the regulations implementing the Minimum Wage Executive Order. 79 FR 
60722 (codified at 29 CFR 10.2). That definition was

[[Page 67607]]

based on the definition of Federal Government set forth in 29 CFR 9.2, 
but eliminated the term ``procurement'' from that definition because 
Executive Order 13658 applies--as does Executive Order 13706--to both 
procurement and non-procurement contracts. 79 FR 60642. Consistent with 
the SCA, the term Federal Government under the proposal included 
nonappropriated fund instrumentalities under the jurisdiction of the 
Armed Forces or of other Federal agencies. See 29 CFR 4.107(a). The 
proposed definition provided that for purposes of Executive Order 13706 
and part 13, Federal Government did not include the District of 
Columbia or any Territory or possession of the United States. As used 
in the Order and part 13, the term also did not include any independent 
regulatory agency within the meaning of 44 U.S.C. 3502(5) because such 
agencies are not required to comply with the Order or part 13.
    Bredhoff & Kaiser's comment, discussed above with respect to the 
definition of executive departments and agencies, suggested that the 
Department adjust the definition of Federal Government to ensure that 
this rulemaking applies to covered contracts with the U.S. Postal 
Service. The Department believes that the definition of Federal 
Government is sufficiently broad that the expansion of the definition 
of executive departments and agencies to include the U.S. Postal 
Service fulfills the purpose of making clear that the Department 
interprets the Order and part 13 to apply to covered contracts with the 
U.S. Postal Service. The Department therefore adopts the definition as 
proposed.
    The Department proposed to define health care provider as any 
practitioner who is licensed or certified under Federal or State law to 
provide the health-related service in question or any practitioner 
recognized by an employer or the employer's group health plan. The term 
included, but was not limited to, doctors of medicine or osteopathy, 
podiatrists, dentists, psychologists, optometrists, chiropractors, 
nurse practitioners, nurse-midwives, clinical social workers, physician 
assistants, physical therapists, and Christian Science Practitioners 
listed with the First Church of Christ, Scientist in Boston, 
Massachusetts. This definition was intended to be broad and inclusive, 
and the Department reiterates that the list is not exhaustive. For 
example, not only a nurse practitioner, but also a registered nurse or 
a licensed practical nurse, would fall under this definition if an 
employee sought a service such a practitioner was licensed or certified 
to provide. The definition was derived from the definitions of health 
care provider in the FMLA regulations, 29 CFR 825.125, and OPM 
regulations, 5 CFR 630.201 and 5 CFR 630.1202.
    EEAC was opposed to the breadth of this term, specifically 
suggesting that referring to ``psychologists'' instead of ``clinical 
psychologists'' and failing to limit ``chiropractors'' with the phrase 
``treatment consisting of manual manipulation of the spine to correct a 
subluxation as demonstrated by X-ray to exist'' was inappropriate. 
Because the types of ailments and treatments for which an employee may 
use paid sick leave is intended to be broad, the list of practitioners 
is illustrative rather than restricting the types of professionals who 
fall within the definition, and the definition is already limited to 
practitioners licensed or certified under Federal or State law or 
recognized by an employer or the employer's group health plan, the 
Department does not believe the suggested changes are appropriate. 
Accordingly, it adopts the definition as proposed.
    The Department proposed to define the term independent agencies as 
any independent regulatory agency within the meaning of 44 U.S.C. 
3502(5). Section 6(g) of the Executive Order states that 
``[i]ndependent agencies are strongly encouraged to comply with the 
requirements of this order.'' The Department's proposal interpreted 
this provision, as it interpreted an identical provision in the Minimum 
Wage Executive Order, to mean that independent agencies are not 
required to comply with this Executive Order. See 79 FR 9853; 79 FR 
60643. The proposed definition was therefore based on other Executive 
Orders that similarly exempt independent regulatory agencies within the 
meaning of 44 U.S.C. 3502(5) from the definition of agency or include 
language requesting that they comply. See, e.g., Executive Order 13636, 
78 FR 11739 (Feb. 12, 2013) (defining agency as any executive 
department, military department, Government corporation, Government-
controlled operation, or other establishment in the executive branch of 
the Government but excluding independent regulatory agencies as defined 
in 44 U.S.C. 3502(5)); Executive Order 13610, 77 FR 28469 (May 10, 
2012) (same); Executive Order 12861, 58 FR 48255 (September 11, 1993) 
(``Sec. 4 Independent Agencies. All independent regulatory commissions 
and agencies are requested to comply with the provisions of this 
order.''); Executive Order 12837, 58 FR 8205 (Feb. 10, 1993) (``Sec. 4. 
All independent regulatory commissions and agencies are requested to 
comply with the provisions of this order.''). The Department received 
no comments regarding this definition and adopts it as proposed.
    The Department proposed to include in Sec.  13.2 a definition of 
individual related by blood or affinity whose close association with 
the employee is the equivalent of a family relationship. The Department 
proposed to define the term to mean any person with whom the employee 
has a significant personal bond that is or is like a family 
relationship, regardless of biological or legal relationship. The NPRM 
noted that although this term is used in the OPM regulations, see 5 CFR 
630.201 (defining ``family member,'' for purposes of Federal employees' 
use of leave, to include the term), OPM has not created a regulatory 
definition of it; the Department's proposed definition was, however, 
derived from OPM's discussion of the term in OPM's 2010 Final Rule, 75 
FR 33491. In particular, OPM explained that creating an exhaustive list 
of the relationships that meet the definition is not possible, but that 
OPM has ``broadly interpreted the phrase to include such relationships 
as grandparent and grandchild, brother- and sister-in-law, 
fianc[eacute] and fianc[eacute]e, cousin, aunt and uncle, other 
relatives not specified in [the list naming a spouse, child, parent, 
brother, or sister], and close friend, to the extent that the 
connection between the employee and the individual was significant 
enough to be regarded as having the closeness of a family relationship 
even though the individuals might not be related by blood or formally 
in law.'' 75 FR 33492.
    The Department explained in the NPRM that it understood the term to 
be inclusive of non-nuclear family structures, noting that it could 
include, for example, an individual who was a foster child in the same 
home in which the employee was a foster child for several years and 
with whom the employee has maintained a sibling-like relationship, a 
friend of the family in whose home the employee lived while she was in 
high school and whom the employee therefore considers to be like a 
mother or aunt to her, or an elderly neighbor with whom the employee 
has regularly shared meals and to whom the employee has provided unpaid 
caregiving assistance for the past 5 years and whom the employee 
therefore considers to be like a grandfather to her.
    In the NPRM, the Department sought comments regarding its proposed 
definition of this term, in particular regarding whether additional 
specificity was necessary. Numerous organizations--including but not 
limited to Lambda Legal, the National LGBTQ Task Force, Pride at Work, 
CAP,

[[Page 67608]]

the Children's Alliance, the Family Equality Council, Equality Maine, 
Basic Rights Oregon, CLASP, Demos, A Better Balance, the Working 
Families Organization, Caring Across Generations, the Labor Project for 
Working Families in partnership with Family Values @ Work, and the 
Movement Advancement Project--strongly supported the proposed 
definition of this phrase. Many of these commenters noted that many 
Americans live in multigenerational households and LGBTQ Americans in 
particular often rely on ``families of choice,'' meaning that any 
specific limitations inserted into the definition could defeat the 
purpose of using the broad term. They also wrote that a broad 
definition has been successfully in place with respect to Federal 
employees' sick leave for years, indicating that the proposed 
definition would not be difficult to implement or likely to be abused. 
The New York City (NYC) Department of Consumer Affairs wrote about its 
experience enforcing a local paid sick time law and the importance of 
capturing, for example, an employee's fianc[eacute] or aunt in the set 
of people for whom the employee can take leave to care. The Main Street 
Alliance, a coalition of employers, wrote that using a broad definition 
alleviated the burden on contractors of determining whether an 
employee's relationship fit into some more limited set of 
relationships. Other commenters noted that the example included in the 
NPRM of the elderly neighbor was useful.
    Other commenters, however, did not support the proposed definition. 
The American Benefits Council, Seyfarth Shaw LLP, the Chamber/IFA, and 
Society for Human Resource Management and the College and University 
Professional Association for Human Resources (SHRM/CUPA-HR), for 
example, asked that the Department narrow the definition. Some of these 
commenters wrote that the definition applies more broadly than is 
necessary to achieve the goals of the Executive Order. Others noted 
that State and local paid sick time laws do not apply as broadly or 
that they believed it would be difficult for contractors to verify 
whether a relationship of the type described exists. A few commenters 
proposed specific replacement definitions: The Independent Electrical 
Contractors, Inc. (IEC) asked that the Department interpret the Order 
to allow an employee to use paid sick leave to care only for 
individuals with whom the employee has a biological or legal 
relationship; Koga Engineering and Construction, Royal Contracting 
Company LTD, Master Sheet Metal, Inc., and the General Contractors 
Association of Hawaii asked that this category extend only to family 
members for whom an employee can take FMLA leave; EEAC asked that it 
extend only to a ``person with whom the employee has a significant 
personal bond that is or is like that of a child, parent or spouse''; 
and Vigilant asked that the Department interpret the word ``affinity'' 
to mean only a relationship by marriage.
    The Department carefully considered the comments received and is 
adopting this definition as proposed. The term has been used with 
respect to sick leave for Federal employees since 1994, see Final Rule, 
Absence and Leave; Sick Leave, 59 FR 62266, 62266-67, 62270-71 
(codified at 5 CFR 630.201(b)(v)), and OPM has indicated that it has 
had and continues to have an expansive meaning, see 75 FR 33491-92. The 
Department agrees with commenters that these facts suggest that the 
term in the Executive Order is best interpreted to have the same 
meaning as the term in the OPM regulations and that OPM does not 
consider its use of the term to have proved unworkable. Furthermore, 
the Department will not depart from the plain meaning of the text, 
which clearly extends beyond marital relationships or those referenced 
in the FMLA and reflects a general intent to be broad and inclusive by 
adopting the specific, significantly narrower definitions some 
commenters suggested. The Department notes that the issue of contractor 
verification of employees' relationships is addressed below in the 
discussions of requests to use paid sick leave and certification or 
documentation of the need to use paid sick leave; because contractor 
inquiries into employees' private lives are deliberately limited, the 
Department does not expect such verification to be intensive or 
complicated.
    The Department proposed to define intimate partner, a term used in 
the definition of domestic violence, to mean a person who is or has 
been in a social relationship of a romantic or intimate nature with the 
victim, where the existence of such a relationship shall be determined 
based on a consideration of the length of the relationship; the type of 
relationship; and the frequency of interaction between the persons 
involved in the relationship. This definition was derived from the 
definition of ``dating partner'' in the VAWA. See 42 U.S.C. 
13925(a)(9). No commenter suggested any revisions to this definition, 
and the Department adopts it as proposed.
    In the Final Rule, the Department has added a definition of 
multiemployer plan, because that term is used in the final regulations 
for reasons explained in the discussion of Sec.  13.8. The term is 
defined to mean a plan to which more than one employer is required to 
contribute and which is maintained pursuant to one or more CBAs between 
one or more employee organizations and more than one employer. This 
definition is derived from, but not identical to, the definition of the 
term under the Employee Retirement Income Security Act of 1974 (ERISA), 
29 U.S.C. 1001 et seq. See 29 U.S.C. 1002(37). Because of the 
differences between the ERISA definition and that used here, a plan 
could qualify as a multiemployer plan for purposes of part 13 even 
though it does not so qualify for purposes of ERISA.
    The Department proposed that the term new contract have the same 
meaning as in the Minimum Wage Executive Order Final Rule, but with 
dates altered to reflect the timing contemplated in section 7 of 
Executive Order 13706. See 79 FR 60722 (codified at 29 CFR 10.2); 80 FR 
54700. Under the proposed definition, a new contract was a contract 
that results from a solicitation issued on or after January 1, 2017, or 
a contract that is awarded outside the solicitation process on or after 
January 1, 2017. This term included both new contracts and replacements 
for expiring contracts. It did not apply to the unilateral exercise of 
a pre-negotiated option to renew an existing contract by the Federal 
Government. The proposal explained that for purposes of the Executive 
Order, a contract that is entered into prior to January 1, 2017 would 
constitute a new contract if, through bilateral negotiation, on or 
after January 1, 2017: (1) The contract is renewed; (2) the contract is 
extended, unless the extension is made pursuant to a term in the 
contract as of December 31, 2016 providing for a short-term limited 
extension; or (3) the contract is amended pursuant to a modification 
that is outside the scope of the contract. The Minimum Wage Executive 
Order rulemaking explained that this definition was derived from 
section 8 of that Executive Order, 79 FR 9853, is consistent with the 
convention set forth in section 1.108(d) of the FAR, 48 CFR 1.108(d), 
and was developed in part in response to comments on the proposed 
definition of new contract that appeared in the Minimum Wage Executive 
Order NPRM. 79 FR 60643, 60646-49. No commenter suggested altering this 
definition, and the Department adopts it as proposed. Additional 
discussion of what constitutes a new contract appears in the text 
addressing Sec.  13.3 below.

[[Page 67609]]

    For purposes of the Executive Order and part 13, which use the 
terms in reference to domestic violence, sexual assault, or stalking, 
the Department proposed to define obtain additional counseling, seek 
relocation, seek assistance from a victim services organization, or 
take related legal action to mean to spend time arranging, preparing 
for, or executing acts related to addressing physical injuries or 
mental or emotional impacts resulting from being a victim of domestic 
violence, sexual assault, or stalking. Under the NPRM, such acts 
included finding and using services of a counselor or victim services 
organization (a term also defined in Sec.  13.2) intended to assist a 
victim to respond to or prevent future incidents of domestic violence, 
sexual assault, or stalking; identifying and moving to a different 
residence to avoid being a victim of domestic violence, sexual assault, 
or stalking; or a victim's pursuing any related legal action (another 
term defined in Sec.  13.2). The Department stated in the proposal that 
counseling could, but need not be, provided by a health care provider. 
The Department did not receive comments addressing this definition and 
adopts it as proposed.
    The Department proposed to define obtaining diagnosis, care, or 
preventive care from a health care provider to mean receiving services 
from a health care provider, whether to identify, treat, or otherwise 
address an existing condition or to prevent potential conditions from 
arising. The Department interpreted this term broadly and provided the 
following non-exhaustive list of examples: Obtaining a prescription for 
antibiotics at a health clinic, attending an appointment with a 
psychologist, having an annual physical or gynecological exam, or 
receiving a teeth cleaning from a dentist's assistant. The proposed 
definition further noted that it included time spent traveling to and 
from the location at which such services are provided or recovering 
from receiving such services. The Center for the Study of Social Policy 
commented that the Department should state explicitly that this 
definition includes seeking treatment for drug or substance abuse. 
Under the definition as proposed and adopted, any treatment for drug, 
alcohol, or another addiction received from a practitioner who is a 
health care provider as defined in Sec.  13.2 would be included in this 
definition. The Department adopts the definition as proposed.
    The Department proposed to define the term Office of Administrative 
Law Judges to mean the Office of Administrative Law Judges, U.S. 
Department of Labor. The Department adopts this definition as proposed.
    Proposed Sec.  13.2 defined the term option by adopting the 
definition of that term used in the Minimum Wage Executive Order 
rulemaking, which in turn adopted the definition set forth in section 
2.101 of the FAR, 48 CFR 2.101. 79 FR 60643, 60722 (codified at 29 CFR 
10.2). Under the proposal, the term option meant a unilateral right in 
a contract by which, for a specified time, the Federal Government may 
elect to purchase additional supplies or services called for by the 
contract, or may elect to extend the term of the contract. No 
commenters suggested changes to this definition, and it is adopted as 
proposed.
    The Department proposed to define paid sick leave to mean 
compensated absence from employment that is required by Executive Order 
13706 and part 13. In the NPRM and again in this Final Rule, the 
Department used and uses ``paid sick leave'' to refer to the leave 
required by the Order and part 13 and ``paid sick time'' to refer more 
generally to any compensated absence from work for time used for 
purposes similar (although not necessarily identical) to the purposes 
described in the Order, including as required by State and local laws 
or as provided pursuant to contractors' existing policies or under 
CBAs. The Department received no comments regarding this definition and 
adopts it as proposed.
    Proposed Sec.  13.2 defined the term parent to mean (1) a 
biological, adoptive, step, or foster parent of the employee, or a 
person who was a foster parent of the employee when the employee was a 
minor; (2) a person who is the legal guardian of the employee or was 
the legal guardian of the employee when the employee was a minor or 
required a legal guardian; (3) a person who stands in loco parentis to 
the employee or stood in loco parentis to the employee when the 
employee was a minor or required someone to stand in loco parentis; or 
(4) a parent, as described in paragraphs (1) through (3) of the 
definition, of an employee's spouse or domestic partner. This 
definition was adopted from the OPM regulations regarding leave for 
Federal employees. 5 CFR 630.102(b). EEAC urged the Department to use 
the definition of parent provided in the FMLA in order not to include 
the parent of an employee's spouse or domestic partner. Because, as 
noted above, the Department interprets the Order's deliberate inclusion 
of family members beyond those for whom an employee could take FMLA 
leave to indicate a general intent to allow the use of leave to care 
for a broad set of family members, it is adopting the definition as 
proposed.
    The Department proposed to define physical or mental illness, 
injury, or medical condition as any disease, sickness, disorder, or 
impairment of, or any trauma to, the body or mind. The Department 
explained in the NPRM that the Executive Order intended for this term 
to be understood broadly, to include any illness, injury, or medical 
condition, regardless of whether it requires attention from a health 
care provider or whether it would be a ``serious health condition'' 
that qualifies for use of leave under the FMLA. See 29 U.S.C. 2611(11); 
29 CFR 825.113. In the NPRM, the Department provided the following non-
exclusive list of conditions included within the proposed definition: A 
common cold, ear infection, upset stomach, ulcer, flu, headache, 
migraine, sprained ankle, broken arm, or depressive episode. The 
Department did not receive comments addressing this definition and 
adopts it as proposed.
    The Department proposed to define predecessor contract to mean a 
contract that precedes a successor contract. Because this definition 
was only included in the proposed rule in connection with the provision 
in Sec.  13.5(b)(4) requiring reinstatement of paid sick leave by 
successor contractors, which for the reasons explained below does not 
appear in the Final Rule, the Department has removed this definition 
from Sec.  13.2.
    The proposed rule defined procurement contract for construction as 
that term was defined for purposes of the Minimum Wage Executive Order 
Final Rule, that is, to mean a contract for the construction, 
alteration, or repair (including painting and decorating) of public 
buildings or public works and which requires or involves the employment 
of mechanics or laborers, and any subcontract of any tier thereunder. 
79 FR 60723 (codified at 29 CFR 10.2). That proposed definition, which 
was derived from language found at 40 U.S.C. 3142(a) and 29 CFR 5.2(h), 
included any contract subject to the DBA. See 79 FR 60643. No commenter 
addressed this definition, and it is adopted as proposed.
    The Department proposed to define the term procurement contract for 
services to mean a contract the principal purpose of which is to 
furnish services in the United States through the use of service 
employees, and any subcontract of any tier thereunder. The proposal 
also stated that the term includes any

[[Page 67610]]

contract subject to the SCA. This proposed definition was derived, as 
explained in the Minimum Wage Executive Order, from language set forth 
in 41 U.S.C. 6702(a), 29 CFR 4.1a(e), and 29 CFR 9.2. 79 FR 60643. The 
Department did not receive comments specifically addressing this 
definition. For the reasons explained in the discussion of service 
contract coverage below, the Department is adopting the definition as 
proposed.
    For purposes of the Executive Order and part 13, which use the 
terms in reference to domestic violence, sexual assault, or stalking, 
the Department proposed to define related legal action or related civil 
or criminal legal proceeding to mean any type of legal action, in any 
forum, that relates to domestic violence, sexual assault, or stalking, 
including, but not limited to, family, tribal, territorial, 
immigration, employment, administrative agency, housing matters, campus 
administrative or protection or stay-away order proceedings, and other 
similar matters; and criminal justice investigations, prosecutions, and 
post-trial matters (including sentencing, parole, and probation) that 
impact the victim's safety and privacy. This definition, which the 
Department intended to be broad and inclusive, was derived from the 
definition of ``legal assistance'' that appears in the VAWA. See 42 
U.S.C. 13925(a)(19). The Department explained in the NPRM that this 
definition encompassed actions in any civil or criminal court, 
including a juvenile court. The definition also included administrative 
proceedings run by institutions of higher education (college, community 
college, university, or trade school), such as those related to alleged 
violations of Title IX of the Education Amendments of 1972, 20 U.S.C. 
1681 et seq. The Department received no comments regarding this 
definition and adopts it as proposed.
    Under proposed Sec.  13.2, Secretary meant the Secretary of Labor 
and included any official of the U.S. Department of Labor authorized to 
perform any of the functions of the Secretary of Labor under part 13. 
The Department adopts this definition as proposed.
    The Department proposed to define the term Service Contract Act to 
mean the McNamara-O'Hara Service Contract Act of 1965, as amended, 41 
U.S.C. 6701 et seq., and its implementing regulations. See 29 CFR 
4.1a(a). This provision is adopted as proposed.
    The proposed definition of sexual assault in Sec.  13.2 was any 
nonconsensual sexual act proscribed by Federal, tribal, or State law, 
including when the victim lacks capacity to consent. This definition 
was adopted from the VAWA. See 42 U.S.C. 13925(a)(29). No commenter 
suggested revising this definition, and the Department adopts it as 
proposed.
    In the NPRM, the term solicitation was defined to have the meaning 
given to it in the Minimum Wage Executive Order Final Rule, i.e., any 
request to submit offers, bids, or quotations to the Federal 
Government. 79 FR 60673 (codified at 29 CFR 10.2). As explained in the 
Minimum Wage Executive Order rulemaking, the definition was based on 
language from 29 CFR 9.2, and requests for information issued by 
Federal agencies and informal conversations with federal workers do not 
fall within the definition. See 79 FR 60643-44. No comments addressed 
this definition, and it is adopted as proposed.
    The Department proposed to define the term spouse as the other 
person with whom an individual entered into marriage as defined or 
recognized under State law for purposes of marriage in the State in 
which the marriage was entered into or, in the case of a marriage 
entered into outside of any State, if the marriage is valid in the 
place where entered into and could have been entered into in at least 
one State. This definition included an individual in a common law 
marriage that was entered into in a State that recognizes such 
marriages or, if entered into outside of any State, is valid in the 
place where entered into and could have been entered into in at least 
one State. This definition was derived from the FMLA regulations. See 
29 CFR 825.122 (as updated by Definition of Spouse Under the Family and 
Medical Leave Act, 80 FR 9989 (Feb. 25, 2015)). As the Department noted 
in the NPRM, marriage and common law marriage include both same-sex and 
opposite-sex marriages or common law marriages. The Department did not 
receive comments regarding this definition and adopts it as proposed.
    Under proposed Sec.  13.2, stalking meant engaging in a course of 
conduct directed at a specific person that would cause a reasonable 
person to fear for his or her safety or the safety of others or suffer 
substantial emotional distress. This definition was adopted from the 
VAWA. See 42 U.S.C. 13925(a)(30). The Department did not receive 
comments regarding this definition and adopts it as proposed.
    The Department proposed to define successor contract to mean a 
contract for the same or similar services as were provided by a 
different predecessor contractor at the same location. This definition 
does not appear in the Final Rule because, for the reasons explained in 
the discussion of Sec.  13.5(b)(4), the term is no longer relevant.
    In proposed Sec.  13.2, the Department defined the term United 
States as it did in the Minimum Wage Executive Order rulemaking, which 
used the definitions of that term set forth in 29 CFR 9.2 and 48 CFR 
2.101, though it did not adopt any of the exceptions to the definition 
of the term set forth in the FAR. See 79 FR 60645. Based on those 
regulations, United States meant the United States and all executive 
departments, independent establishments, administrative agencies, and 
instrumentalities of the United States, including corporations of which 
all or substantially all of the stock is owned by the United States, by 
the foregoing departments, establishments, agencies, and 
instrumentalities, including nonappropriated fund instrumentalities. 
The proposed definition further noted that when used in a geographic 
sense, the United States meant the 50 States and the District of 
Columbia. The Department did not receive comments regarding this 
definition and adopts it as proposed.
    The Department proposed to define victim services organization to 
mean a nonprofit, nongovernmental, or tribal organization or rape 
crisis center, including a State or tribal coalition, that assists or 
advocates for victims of domestic violence, sexual assault, or 
stalking, including domestic violence shelters, faith-based 
organizations, and other organizations, with a documented history of 
effective work concerning domestic violence, sexual assault, or 
stalking. This definition was based on the definition of ``victim 
service provider'' in the VAWA. See 42 U.S.C. 13925(a)(43). The 
Department intended this definition to include organizations that 
provide services to adult, teen, and/or child victims of domestic 
violence, sexual assault, or stalking. The Department did not receive 
comments regarding this definition and adopts it as proposed.
    The Department proposed to define Violence Against Women Act as the 
Violence Against Women Act of 1994, 42 U.S.C. 13925 et seq., and its 
implementing regulations. This definition is adopted as proposed.
    Finally, the Department proposed to define Wage and Hour Division 
to mean the Wage and Hour Division within the U.S. Department of Labor. 
This definition is adopted as proposed.
Section 13.3 Coverage
    Proposed Sec.  13.3 addressed and implemented the coverage 
provisions of section 6 of Executive Order 13706. 80 FR 54697-700.

[[Page 67611]]

    Proposed Sec.  13.3(a) stated that part 13 applies to any new 
contract with the Federal Government, unless excluded by Sec.  13.4, 
provided that: (1)(i) It is a procurement contract for construction 
covered by the DBA; (ii) it is a contract for services covered by the 
SCA; (iii) it is a contract for concessions, including any concessions 
contract excluded from coverage under the SCA by Department of Labor 
regulations at 29 CFR 4.133(b); or (iv) it is a contract in connection 
with Federal property or lands and related to offering services for 
Federal employees, their dependents, or the general public; and (2) the 
wages of employees performing on or in connection with such contract 
are governed by the DBA, SCA, or FLSA, including employees who qualify 
for an exemption from the FLSA's minimum wage and overtime provisions. 
As explained in more detail below in the discussion of covered 
employees, the Department is promulgating this provision as proposed.
    Proposed Sec.  13.3(b) incorporated the monetary value thresholds 
referred to in section 6(e) of the Executive Order. Specifically, it 
provided that for contracts covered by the SCA or the DBA, part 13 
applies to prime contracts only at the thresholds specified in those 
statutes, and for procurement contracts where employees' wages are 
governed by the FLSA (i.e., procurement contracts not covered by the 
SCA or DBA), part 13 applies when the prime contract exceeds the micro-
purchase threshold, as defined in 41 U.S.C. 1902(a). Proposed Sec.  
13.3(b) further explained that for all other covered prime contracts 
and for all subcontracts awarded under covered prime contracts, part 13 
applies regardless of the value of the contract. In this context, ``all 
other prime contracts'' covered by the Order and part 13 referred to 
non-procurement concessions contracts not covered by the SCA and non-
procurement contracts with the Federal Government in connection with 
Federal property or lands and related to offering services for Federal 
employees, their dependents, or the general public not covered by the 
SCA. The Department received one comment relevant to this provision, 
addressed in the discussion of ``procurement contracts for 
construction'' below, and adopts Sec.  13.3(b) as proposed.
    Proposed Sec.  13.3(c), which was identical to the analogous 
provision in the Minimum Wage Executive Order Final Rule, 29 CFR 
10.3(c), stated that part 13 only applies to contracts with the Federal 
Government requiring performance in whole or in part within the United 
States. It further explained that if a contract with the Federal 
Government is to be performed in part within and in part outside the 
United States and is otherwise covered by the Executive Order and part 
13, the requirements of the Order and part 13 would apply with respect 
to that part of the contract that is performed within the United 
States. As explained below, the Department adopts this provision as 
proposed.
    Proposed Sec.  13.3(d), adopted from the Minimum Wage Executive 
Order regulations, 29 CFR 10.3(d), explained that part 13 does not 
apply to contracts subject to the Walsh-Healey Public Contracts Act, 41 
U.S.C. 6501 et seq. The Department is adopting this provision largely 
as proposed, but with one modification described below in the section 
discussing such contracts.
    The preamble to the proposed rule addressed several issues related 
to the coverage provisions in some detail, and the Department repeats 
those points here, in addition to responding to comments relevant to 
them, in order to ensure that this Final Rule contains a full 
discussion of the scope of coverage under the Order. As noted in the 
NPRM, the Minimum Wage Executive Order Final Rule addressed many of the 
same issues, and much of the discussion here reflects interpretations 
described in that rulemaking.
Coverage of Executive Agencies and Departments
    Executive Order 13706 applies to all ``[e]xecutive departments and 
agencies.'' 80 FR 54697. Like the Minimum Wage Executive Order, it 
strongly encourages but does not compel ``[i]ndependent agencies'' to 
comply with its requirements. 80 FR 54700; see also 79 FR 9853. The 
Department explained in the NPRM that this exemption from coverage is 
narrow, in light of the Executive Order's broad goal of providing paid 
sick leave to employees on contracts with the Federal Government. The 
terms executive departments and agencies (modified to include the U.S. 
Postal Service, as explained above) and independent agencies are 
defined in Sec.  13.2. The Department received no comments regarding 
this interpretation.
Coverage of New Contracts With the Federal Government
    Proposed Sec.  13.3(a) provided that the requirements of the 
Executive Order apply to a ``new contract with the Federal 
Government.'' By applying only to ``new contracts,'' the Executive 
Order ensures that contracting agencies and contractors will have 
sufficient notice of any obligations under Executive Order 13706 and 
can take into account any potential impact of the Order prior to 
entering into ``new contracts'' on or after January 1, 2017. As 
discussed above, the proposed definition of the term contract was 
broadly inclusive, and the proposed definition of new contract was 
modeled on the definition of that term in the Minimum Wage Executive 
Order Final Rule, 29 CFR 10.2, and incorporated the provisions of 
section 7 of Executive Order 13706. Therefore, as proposed, part 13 
applied to covered contracts with the Federal Government that result 
from solicitations issued on or after January 1, 2017, or to contracts 
that are awarded outside the solicitation process on or after January 
1, 2017. For example, any covered contracts that are added to the GSA 
Schedule in response to GSA Schedule solicitations issued on or after 
January 1, 2017 will qualify as ``new contracts'' subject to the Order; 
any covered task orders issued pursuant to those contracts also would 
be deemed to be ``new contracts.'' This included contracts to add new 
covered services as well as contracts to replace expiring contracts.
    As explained in the discussion of Sec.  13.2, the definition of new 
contract (adopted as proposed) also provides that the term includes 
both new contracts and replacements for expiring contracts. Consistent 
with the Minimum Wage Executive Order Final Rule, however, the 
definition does not include the unilateral exercise of a pre-negotiated 
option to renew an existing contract by the Federal Government. As 
discussed above, option means a unilateral right in a contract by 
which, for a specified time, the Federal Government may elect to 
purchase additional supplies or services called for by the contract, or 
may elect to extend the term of the contract. See 48 CFR 2.101.
    The proposed definition of new contract also provided that for 
purposes of the Executive Order, a contract that is entered into prior 
to January 1, 2017 constituted a new contract if, through bilateral 
negotiation, on or after January 1, 2017: (1) The contract is renewed; 
(2) the contract is extended, unless the extension is made pursuant to 
a term in the contract as of December 31, 2016 providing for a short-
term limited extension; or (3) the contract is amended pursuant to a 
modification that is outside the scope of the contract. These 
statements have the same meaning in part 13 as they did in the Minimum 
Wage Executive Order rulemaking. See 79 FR 60646-49. The NPRM also 
noted the Department's understanding that contract extensions may be 
accomplished through options created by an agency pursuant to FAR

[[Page 67612]]

clause 52.217-8 (which allows for an extension of time of up to 6 
months for a contractor to perform services that were acquired but not 
provided during the contract period) or FAR clause 52.217-9 (which 
provides for an extension of the contract term to provide additional 
services for a limited term specified in the contract at previously 
agreed upon prices). As explained, the contracting agency's exercise of 
extensions under these clauses would not trigger application of the 
Order's paid sick leave requirements because the clauses give the 
contracting agency a discretionary right to unilaterally exercise the 
option to extend, and unilateral options are excluded from the 
definition of ``new contract.''
    Specifically, and particularly in light of these clauses, a 
bilaterally negotiated extension of an existing contract on or after 
January 1, 2017 would be viewed as a ``new contract'' unless the 
extension is made pursuant to a term in the contract as of December 31, 
2016 providing for a short-term limited extension, in which case the 
extension would not constitute a ``new contract'' and would not be 
covered. Therefore, a short-term, bilaterally negotiated extension of 
contract terms (e.g., an extension of 6 months or less) that was 
provided for by the pre-negotiated terms of the contract prior to 
January 1, 2017, such as a bridge to prevent a gap in service, would 
not constitute a new contract. See Interim Final Rule, Federal 
Acquisition Regulation; Establishing a Minimum Wage for Contractors, 79 
FR 74544, 74545 (Dec. 15, 2014) (providing that contracting officers 
``shall include'' the FAR contract clause to implement the Minimum Wage 
Executive Order when ``bilateral modifications extending the contract . 
. . are individually or cumulatively longer than six months''). In 
addition, when a contracting agency exercises its unilateral right to 
extend the term of an existing service contract and simply makes 
pricing adjustments based on increased labor costs that result from its 
obligation to include a current SCA wage determination pursuant to 29 
CFR 4.4 but no bilateral negotiations occur (other than any necessary 
to determine and effectuate those pricing adjustments), the Department 
would not view the exercise of that option as a ``new contract'' 
covered by the Executive Order.
    An extension that was bilaterally negotiated and not previously 
authorized by the terms of the existing contract, however, would be a 
``new contract'' subject to the Order's paid sick leave requirements. A 
long-term extension of an existing contract will qualify as a ``new 
contract'' subject to the Executive Order even if such an extension was 
provided for by a pre-negotiated term of the contract.
    With respect to the coverage of other contract modifications, the 
Department's approach is identical to that in the Minimum Wage 
Executive Order Final Rule. 79 FR 60646-49. It reflects that 
modifications within the scope of the contract do not in fact 
constitute new contracts. Long-standing contracting principles 
recognize that an existing contract, especially a larger one, will 
often require modifications, which may include very modest changes 
(e.g., a small change to a delivery schedule). Therefore, regulations 
such as the FAR do not require agencies to create new contracts to 
support these actions. Accordingly, contract modifications that are 
within the scope of the contract within the meaning of the FAR, see 48 
CFR 6.001(c) and related case law, are not ``new contracts'' under the 
proposed definition, even when undertaken after January 1, 2017. The 
Department's proposal nonetheless strongly encouraged agencies to 
bilaterally negotiate, as part of any in-scope modification, 
application of the Executive Order's paid sick leave requirements so 
that such modified contracts could take advantage of the benefits of 
such leave.
    As also explained in the NPRM, if the parties bilaterally negotiate 
a modification that is outside the scope of the contract, the agency 
will be required to create a new contract, triggering solicitation and/
or justification requirements, and thus such a modification after 
January 1, 2017 will constitute a ``new contract'' subject to the 
Executive Order's paid sick leave requirements. For example, if an 
existing SCA-covered contract for janitorial services at a Federal 
office building is modified by bilateral negotiation after January 1, 
2017 to also provide for security services at that building, such a 
modification would likely be regarded as outside the scope of the 
contract and thus qualify as a ``new contract'' subject to the 
Executive Order. Similarly, if an existing DBA-covered contract for 
construction work at Site A was modified by bilateral negotiation after 
January 1, 2017 to also cover construction work at Site B, such a 
modification would generally be viewed as outside the scope of the 
contract and thus trigger coverage of the Executive Order. The 
Department cautioned, however, that whether a modification qualifies as 
``within the scope'' or ``outside the scope'' of the contract is 
necessarily a fact-specific determination. See, e.g., AT&T 
Communications, Inc. v. Wiltel, Inc., 1 F.3d 1201, 1205 (Fed. Cir. 
1993).
    The Department did not receive comments suggesting changes to these 
interpretations regarding what constitutes a ``new contract.'' AGC 
asked whether new task orders under existing indefinite-delivery, 
indefinite-quantity (IDIQ) contracts qualify as new contracts for 
purposes of the Executive Order. A task order under an IDIQ contract 
covered by the Executive Order and part 13 would itself be covered by 
the Order and part 13 to the extent the task order falls within one of 
the four categories of contracts covered by the Order. A task order 
under (and within the scope of) an IDIQ contract that is not covered by 
the Executive Order and part 13, either because the solicitation for 
the IDIQ contract was issued before January 1, 2017, or the IDIQ 
contract was awarded outside the solicitation process before January 1, 
2017, would not qualify under the Order and part 13 as a new contract 
even if the task order was issued after January 1, 2017. However, the 
Department recommended in the NPRM, and reiterates here, that the FARC 
should encourage, if not require, contracting officers to modify 
existing IDIQ contracts in accordance with FAR section 1.108(d)(3) to 
include the paid sick leave requirements of Executive Order 13706 and 
part 13, particularly if the remaining ordering period extends at least 
6 months and the amount of remaining work or number of orders expected 
is substantial. See 79 FR 74545 (providing that contracting officers 
``are strongly encouraged to include'' the FAR contract clause to 
implement the Minimum Wage Executive Order in ``existing indefinite-
delivery indefinite-quantity contracts, if the remaining ordering 
period extends at least six months and the amount of remaining work or 
number of orders expected is substantial'').
Coverage of Types of Contractual Arrangements
    Proposed Sec.  13.3(a)(1) set forth the specific types of 
contractual arrangements with the Federal Government that are covered 
by the Executive Order. Consistent with the intent of Executive Order 
13706 to apply to a wide range of contracts with the Federal Government 
for services or construction, proposed Sec.  13.3(a)(1) implemented the 
Executive Order by generally extending coverage to procurement 
contracts for construction covered by the DBA; service contracts 
covered by the SCA; concessions contracts, including any concessions 
contract excluded by the Department's regulations at 29 CFR 4.133(b); 
and

[[Page 67613]]

contracts in connection with Federal property or lands and related to 
offering services for Federal employees, their dependents, or the 
general public. Each of these categories of contractual agreements is 
discussed in greater detail below. The Department notes that, as was 
also the case under the Minimum Wage Executive Order rulemaking, these 
categories are not mutually exclusive--a concessions contract might 
also be covered by the SCA, as might a contract in connection with 
Federal property or lands, for example--but a contract that falls 
within any one of the four categories is covered.
    Procurement Contracts for Construction: Section 6(d)(i)(A) of the 
Executive Order extends coverage to any ``procurement contract for . . 
. construction.'' 80 FR 54699. As explained in the NPRM and the Minimum 
Wage Executive Order rulemaking, 79 FR 60650, this language indicates 
that the Executive Order and part 13 apply to contracts subject to the 
DBA and that they do not apply to contracts subject only to the Davis-
Bacon Related Acts, including those set forth at 29 CFR 5.1(a)(2)-(60). 
The Final Rule makes no change to this interpretation.
    The DBA applies, in relevant part, to contracts to which the 
Federal Government is a party, for the construction, alteration, or 
repair, including painting and decorating, of public buildings and 
public works of the Federal Government and which require or involve the 
employment of mechanics or laborers. 40 U.S.C. 3142(a). The DBA's 
regulatory definition of construction is expansive and includes all 
types of work done on a particular building or work by laborers and 
mechanics employed by a construction contractor or construction 
subcontractor. See 29 CFR 5.2(j). The DBA's implementing regulations 
define the term ``public building or public work'' as any building or 
work, the construction, prosecution, completion, or repair of which is 
carried on directly by authority of or with funds of a Federal agency 
to serve the interest of the general public. See 29 CFR 5.2(k).
    Proposed Sec.  13.3(b) implemented section 6(e) of Executive Order 
13706, 80 FR 52699-700, which provides that the Order applies only to 
DBA-covered prime contracts that exceed the $2,000 value threshold 
specified in the DBA. See 40 U.S.C. 3142(a). Under this provision, 
which is adopted as proposed, there is no value threshold requirement 
for application of Executive Order 13706 and part 13 to subcontracts 
awarded under such prime contracts. The Mechanical Contractors 
Association of America (MCAA) asked in its comment why the proposal 
covered subcontracts that fall below the DBA threshold amount. The 
Department believes coverage of subcontracts without regard to their 
monetary value is appropriate because it is consistent with the DBA 
itself, which applies the threshold only to prime contracts, 40 U.S.C. 
3142(a), is consistent with the coverage provisions of the Minimum Wage 
Executive Order, which also do not apply threshold amounts to 
subcontracts, 29 CFR 10.3(b), and ensures that employees who work for 
lower-tier contractors on projects in which the prime contract is DBA-
covered are not denied access to paid sick leave.
    Procurement Contracts for Services: Proposed Sec.  13.3(a)(1)(ii) 
provided, in language identical to that of 29 CFR 10.3(a)(1)(ii) as 
promulgated by the Minimum Wage Executive Order Final Rule, 79 FR 
60723, that coverage of the Executive Order and part 13 encompasses any 
``contract for services covered by the Service Contract Act.''
    That proposed provision implemented section 6(d)(i)(B) of the 
Executive Order, which states that the Order applies to ``a contract or 
contract-like instrument for services covered by the Service Contract 
Act.'' 80 FR 54699. The SCA applies (subject to the exceptions 
discussed below) to any contract entered into by the United States that 
``has as its principal purpose the furnishing of services in the United 
States through the use of service employees.'' 41 U.S.C. 6702(a)(3); 
see also 29 CFR 4.110. The SCA is intended to cover a wide variety of 
service contracts with the Federal Government, so long as the principal 
purpose of the contract is to provide services using service employees. 
See, e.g., 29 CFR 4.130(a). SCA coverage exists regardless of the 
direct beneficiary of the services or the source of the funds from 
which the contractor is paid for the service and irrespective of 
whether the contractor performs the work in its own establishment, on a 
Government installation, or elsewhere. 29 CFR 4.133(a).
    The NPRM noted, however, that in addition to the provision in 
section 6(d)(i)(B) of the Executive Order extending coverage to 
contracts covered by the SCA, section 6(d)(i)(A) provides that the 
Order applies to ``a procurement contract for services.'' 80 FR 54699. 
In the Minimum Wage Executive Order rulemaking, the Department 
interpreted these two phrases together to mean that Executive Order 
13658 applied to all procurement and non-procurement contracts covered 
by the SCA. As the NPRM to implement Executive Order 13706 explained, 
the phrase ``a procurement contract for services'' could instead be 
construed to encompass a category or categories of procurement 
contracts for services beyond those covered by the SCA.
    The SCA does not apply to all procurement contracts with the 
Federal Government for services. For example, the SCA itself contains a 
list of exemptions from its coverage: It does not apply to ``a contract 
for the carriage of freight or personnel by vessel, airplane, bus, 
truck, express, railway line or oil or gas pipeline where published 
tariff rates are in effect''; ``a contract for the furnishing of 
services by radio, telephone, telegraph, or cable companies, subject to 
the Communications Act of 1934''; ``a contract for public utility 
services, including electric light and power, water, steam, and gas''; 
``an employment contract providing for direct services to a Federal 
agency by an individual''; and ``a contract with the United States 
Postal Service, the principal purpose of which is the operation of 
postal contract stations.'' 41 U.S.C. 6702(b); see also 29 CFR 4.115-
4.122. Additionally, the SCA regulations at 29 CFR 4.123(d) and (e) 
identify certain categories of contracts the Department has exempted 
from SCA coverage pursuant to authority granted by the SCA, see 41 
U.S.C. 6707(b), to the extent regulatory criteria for exclusion from 
coverage are satisfied. For example, 29 CFR 4.123(e)(1)(i)(A) exempts 
from SCA coverage certain contracts principally for the maintenance, 
calibration, or repair of automated data processing equipment and 
office information/word processing systems. Furthermore, the SCA does 
not apply to contracts for services to be performed exclusively by 
persons who are not service employees, i.e., persons who qualify as 
bona fide executive, administrative, or professional employees as 
defined in the FLSA's regulations at 29 CFR part 541. 29 CFR 
4.113(a)(2); see also 41 U.S.C. 6701(a)(3)(C), 6702(a)(3); WHD Field 
Operations Handbook (FOH) ] 14c07. Similarly, a contract for services 
``performed essentially by bona fide executive, administrative, or 
professional employees, with the use of service employees being only a 
minor factor in contract performance,'' is not covered by the SCA. 29 
CFR 4.113(a)(3); FOH ] 14c07.
    In the proposed rule, the Department sought comment as to whether 
it should include within the coverage of Executive Order 13706 a wider 
set of procurement contracts for services than those contracts for 
services covered by

[[Page 67614]]

the SCA. The Department's proposal noted that, for example, an 
interpretation treating as covered procurement contracts for services 
performed exclusively or essentially by employees who qualify as bona 
fide executive, administrative, or professional employees as defined in 
the FLSA's regulations at 29 CFR part 541--a type of employee covered 
by section 6(d)(ii) of the Order because such employees qualify for an 
exemption from the FLSA's minimum wage and overtime provisions, 80 FR 
54700--would extend the Order's paid sick leave requirements to some 
such employees who would otherwise not be covered by the Order. The 
proposal further noted that an interpretation treating as covered other 
types of service contracts explicitly exempted from SCA coverage under 
41 U.S.C. 6702(b) and 29 CFR 4.123(d) and (e) would also extend the 
Order's paid sick leave requirements to at least some employees on any 
such contracts; although those employees' wages would by definition not 
be covered by the SCA, under such an interpretation, employees 
performing work on or in connection with such contracts whose wages 
were governed by the FLSA, including employees who qualify for an 
exemption from its minimum wage and overtime provisions, would be 
entitled to paid sick leave under the Order and part 13. The Department 
sought comments on the potential scope and implications of such 
coverage, including whether employees who work on or in connection with 
certain categories of non-SCA-covered service contracts currently 
typically do not have paid sick time or do not have any type of paid 
time off such that the protections of Executive Order 13706 would be 
particularly significant to them.
    Numerous commenters, including CLASP, Equal Rights Advocates, the 
CAP Women's Initiative, Caring Across Generations, the Working Families 
Organization, Women Employed, the Center for Popular Democracy (CPD), 
and the National Association of County and City Health Officials, urged 
the Department to ensure that the Executive Order covers all 
procurement contracts for services in order to extend paid sick leave 
benefits to as many employees as possible. The AFL-CIO also encouraged 
the Department to expand contract coverage under the Order and part 13. 
Other commenters, such as PSC, the Chamber/IFA, and the American 
Benefits Council, however, urged the Department not to expand coverage 
to service contracts not covered by the SCA. In particular, PSC 
asserted that covering contracts for services performed exclusively or 
essentially by employees who qualify as bona fide executive, 
administrative, or professional employees would discourage technology 
and consulting companies from doing business with the Federal 
Government. It also asserted that contracts such as those involving 
utilities and airlines are exempted from the SCA by regulation for 
reasons that would also make application of paid sick leave 
requirements particularly difficult and therefore inappropriate.
    After careful consideration of these comments, the Department is 
adopting Sec.  13.3(a)(1)(ii) as proposed, that is, it is interpreting 
the Executive Order to cover contracts for services covered by the SCA 
and not (other than contracts covered by Sec.  13.3(a)(1)(iii) and 
(iv)) contracts for services that, although entered into with an 
executive department or agency, are not covered by the SCA. Although 
the Department continues to believe in the importance of ensuring that 
employees performing work on or in connection with Federal contracts 
have access to paid sick leave, in this case, for reasons of 
consistency with the Minimum Wage Executive Order Final Rule and 
familiarity with the types of obligations and requirements imposed by 
the SCA and Minimum Wage Executive Order, the Department believes the 
best course is the one proposed in the NPRM.
    The Department reiterates, however, that under Sec.  
13.3(a)(1)(iii) and (iv) (as well as Sec.  13.3(d), described below), 
irrespective of whether a contract is covered by part 13 because it is 
an SCA-covered contract, the Order's paid sick leave requirements apply 
to service contracts that are concessions contracts, including all 
concessions contracts excluded by the SCA regulations at 29 CFR 
4.133(b); apply to service contracts that are in connection with 
Federal property or lands and related to offering services for Federal 
employees, their dependents, or the general public; and do not apply to 
contracts for the manufacturing or furnishing of materials, supplies, 
articles, or equipment to the Federal Government that are subject to 
the Walsh-Healey Public Contracts Act, 41 U.S.C. 6501 et seq.
    Proposed Sec.  13.3(b) implemented section 6(e) of the Executive 
Order, which provides that for SCA-covered contracts, the Executive 
Order applies only to those prime contracts that exceed the threshold 
for prevailing wage requirements specified in the SCA. 80 FR 54700. 
Although the SCA covers all non-exempted contracts with the Federal 
Government that have the ``principal purpose'' of furnishing services 
in the United States through the use of service employees regardless of 
the value of the contract, the prevailing wage requirements of the SCA 
only apply to covered contracts in excess of $2,500. 41 U.S.C. 
6702(a)(2). Consistent with the SCA, under proposed Sec.  13.3(b), 
there would be no value threshold requirement for application of 
Executive Order 13706 and part 13 to subcontracts awarded under such 
prime contracts. The Department received no comments on this portion of 
the proposed provision.
    Contracts for Concessions: Proposed Sec.  13.3(a)(1)(iii) 
implemented the Executive Order's coverage of a ``contract or contract-
like instrument for concessions, including any concessions contract 
excluded by the Department of Labor's regulations at 29 CFR 4.133(b),'' 
80 FR 54699, just as the Minimum Wage Executive Order Final Rule 
implemented identical language in that Order, see 79 FR 60638, 60652.
    The SCA generally covers contracts for concessionaire services. See 
29 CFR 4.130(a)(11). Pursuant to the Secretary's authority under 
section 4(b) of the SCA, however, the SCA's regulations specifically 
exempt from coverage concession contracts ``principally for the 
furnishing of food, lodging, automobile fuel, souvenirs, newspaper 
stands, and recreational equipment to the general public.'' 29 CFR 
4.133(b); 48 FR 49736, 49753 (Oct. 27, 1983).\1\ Proposed Sec.  
13.3(a)(1)(iii) extended coverage of the Executive Order and part 13 to 
all concession contracts with the Federal Government, including those 
exempted from SCA coverage. The Department explained that the Executive 
Order generally covers, for example, souvenir shops at national 
monuments as well as boat rental facilities and fast food restaurants 
at National Parks. In addition, consistent with the SCA's implementing 
regulations at 29 CFR 4.107(a), the Department proposed that the 
Executive Order generally apply to concessions contracts with 
nonappropriated fund instrumentalities under the jurisdiction

[[Page 67615]]

of the Armed Forces or other Federal agencies.
---------------------------------------------------------------------------

    \1\ This exemption applies to certain concessions contracts that 
provide services to the general public, but does not apply to 
concessions contracts that provide services to the Federal 
Government or its personnel or to concessions services provided 
incidentally to the principal purpose of a covered SCA contract. 
See, e.g., 29 CFR 4.130 (providing an illustrative list of SCA-
covered contracts); In the Matter of Alcatraz Cruises, LLC, ARB Case 
No. 07-024, 2009 WL 250456 (ARB Jan. 23, 2009) (holding that the SCA 
regulatory exemption at 29 CFR 4.133(b) does not apply to National 
Park Service contracts for ferry transportation services to and from 
Alcatraz Island).
---------------------------------------------------------------------------

    Under proposed Sec.  13.3(b), the Executive Order applies to an 
SCA-covered concessions contract only if it exceeds $2,500. Id.; 41 
U.S.C. 6702(a)(2). Section 6(e) of the Executive Order further provides 
that, for procurement contracts where employees' wages are governed by 
the FLSA, such as any procurement contracts for concessionaire services 
that are excluded from SCA coverage under 29 CFR 4.133(b), part 13 
applies only to contracts that exceed the micro-purchase threshold, as 
defined in 41 U.S.C. 1902(a). That threshold is currently defined in 
the FAR as $3,500. 48 CFR 2.101. The Department proposed that there be 
no value threshold for application of Executive Order 13706 and part 13 
to subcontracts awarded under covered prime contracts or for non-
procurement concessions contracts that are not covered by the SCA.
    The Chamber/IFA and the American Benefits Council commented that 
the Order should not apply to concessions contracts, explaining that 
such contractors will be disadvantaged by the requirements of the Order 
and part 13 because they compete against businesses that do not 
contract with the Federal Government and therefore do not bear the 
costs of providing paid sick leave. The Department declines to amend 
part 13's coverage provisions to exclude concessions contracts because 
section 6(d)(i)(C) of the Executive Order explicitly names such 
contracts as one of the types to which the Order applies. 80 FR 54699.
    Contracts in Connection with Federal Property or Lands and Related 
to Offering Services: Proposed Sec.  13.3(a)(1)(iv) implemented section 
6(d)(i)(D) of the Executive Order, which extends coverage to contracts 
entered into with the Federal Government in connection with Federal 
property or lands and related to offering services for Federal 
employees, their dependents, or the general public. See 80 FR 54699; 
see also 79 FR 60655 (Minimum Wage Executive Order Final Rule preamble 
discussion of identical provisions in the Minimum Wage Executive Order 
and 29 CFR part 10). The Department's proposal interpreted this 
provision as generally including leases of Federal property, including 
space and facilities, and licenses to use such property entered into by 
the Federal Government for the purpose of offering services to the 
Federal Government, its personnel, or the general public to the extent 
that such agreements are not otherwise covered by Sec.  13.3(a)(1). In 
other words, under the proposal, a private entity that leases space in 
a Federal building to provide services to Federal employees or the 
general public would be covered by the Executive Order and part 13 
regardless of whether the lease is subject to the SCA. The Department 
noted in the NPRM that evidence that an agency has retained some 
measure of control over the terms and conditions of the lease or 
license to provide services, though not necessary for purposes of 
determining applicability of this section, would strongly indicate that 
the agreement involved is covered by section 6(d)(i)(D) of the 
Executive Order and Sec.  13.3(a)(1)(iv). Pursuant to this 
interpretation, a private fast food or casual dining restaurant that 
rents space in a Federal building and serves food to the general public 
would be subject to the Executive Order's paid sick leave requirements 
even if the contract does not constitute a concessions contract for 
purposes of the Order and part 13. Additional examples of agreements 
that would generally be covered by the Executive Order and part 13 
under the proposed approach (regardless of whether they would also be 
covered because they are subject to the SCA) include delegated leases 
of space in a Federal building from an agency to a contractor whereby 
the contractor operates a child care center, credit union, gift shop, 
barber shop, health clinic, or fitness center in the space to serve 
Federal employees and/or the general public.
    Although this definition is broad, the Department noted some limits 
to it in the NPRM that it reiterates here. First, coverage under this 
proposed section only extends to contracts that are in connection with 
Federal property or lands. For example, if a Federal agency contracts 
with an outside catering company to provide and deliver coffee for a 
conference, such a contract will not be considered a covered contract 
under section 6(d)(i)(D), although it would be a covered contract under 
section 6(d)(i)(B) if it is covered by the SCA. Moreover, because the 
Department does not interpret section 6(d)(i)(D)'s reference to 
``Federal property'' to encompass money, purely financial transactions 
with the Federal Government, i.e., contracts that are not in connection 
with physical property or lands, are not covered by the Order and part 
13. In addition, as explained in the proposed rule, section 6(d)(i)(D) 
coverage only extends to contracts ``related to offering services for 
Federal employees, their dependents, or the general public.'' 
Therefore, if a Federal agency contracted with a company to solely 
supply materials in connection with Federal property or lands, the 
Department would not consider the contract to be covered by section 
6(d)(i)(D) because it is not a contract related to offering services. 
Likewise, because a license or permit to conduct a wedding on Federal 
property or lands generally would not relate to offering services for 
Federal employees, their dependents, or the general public, but rather 
would only relate to offering services to the specific individual 
applicant(s), the Department would not consider such a contract covered 
by section 6(d)(i)(D).
    Proposed Sec.  13.3(b) interpreted section 6(e) of Executive Order 
13706, 80 FR 54700, to mean that the Order applies only to SCA-covered 
prime contracts in connection with Federal property or lands and 
related to offering services if such contracts exceed $2,500. 41 U.S.C. 
6702(a)(2); 29 CFR 4.141(a). For procurement contracts in connection 
with Federal property or lands and related to offering services where 
employees' wages are governed by the FLSA (rather than the SCA), part 
13 applies only to such contracts that exceed the $3,500 micro-purchase 
threshold, as defined in 41 U.S.C. 1902(a) and 48 CFR 2.101. As to 
subcontracts awarded under prime contracts in this category and non-
procurement contracts in connection with Federal property or lands and 
related to offering services for Federal employees, their dependents, 
or the general public that are not SCA-covered, the Department proposed 
and is adopting no value threshold for coverage under Executive Order 
13706 and part 13.
    The Chamber/IFA and the American Benefits Council commented that 
the Order should not apply to contracts in connection with Federal 
property or lands and related to offering services for Federal 
employees, their dependents, or the general public for the same reasons 
on which they based their objections to the coverage of concessions 
contracts. Because section 6(d)(i)(D) of the Executive Order explicitly 
names contracts in connection with Federal property or lands and 
related to offering services for Federal employees, their dependents, 
or the general public as one of the types of contracts to which the 
Order applies, 80 FR 54699, the Department does not believe it would be 
appropriate to exclude such contracts from coverage under part 13.
    Contracts Subject to the Walsh-Healey Public Contracts Act: 
Finally, the Department proposed to include as Sec.  13.3(d) a 
statement that contracts for the manufacturing or furnishing of 
materials, supplies, articles, or

[[Page 67616]]

equipment to the Federal Government that are subject to the Walsh-
Healey Public Contracts Act (PCA), 41 U.S.C. 6501 et seq., are not 
covered by Executive Order 13706 or part 13. As noted in the NPRM, 
however, where a PCA-covered contract involves a substantial and 
segregable amount of construction work that is subject to the DBA, 
employees whose wages are governed by the DBA or FLSA, including those 
who qualify for an exemption from the FLSA's minimum wage and overtime 
provisions, are covered by the Executive Order for the hours that they 
spend performing work on or in connection with such DBA-covered 
construction work.
    No commenters asked that the Department not exempt contracts 
subject to the PCA. EEAC asked for clarification about the Order's 
application to a contract for the manufacturing or furnishing of 
materials, supplies, articles, or equipment to the Federal Government 
for an amount less than $15,000, the threshold amount for PCA coverage. 
See 48 CFR 22.602. Because such contracts are not one of the four types 
of covered contracts, the Department did not intend for the NPRM to 
imply that they could be covered, nor does it intend to cover them in 
the Final Rule. To make this point more evident, the text of Sec.  
13.3(d) has been slightly modified to indicate that PCA-covered 
contracts are an example of contracts for the manufacturing or 
furnishing of materials, supplies, articles, or equipment to the 
Federal Government rather than to suggest that all such contracts are 
PCA-covered.
Coverage of Subcontracts
    As explained in the Minimum Wage Executive Order rulemaking, 79 FR 
60657-58, the Department proposed that the same test for determining 
application of the Executive Order to prime contracts apply to the 
determination of whether a subcontract is covered by the Order, with 
the distinction that the value threshold requirements set forth in 
section 6(e) of the Order do not apply to subcontracts. In other words, 
the Department proposed that the requirements of the Order apply to a 
subcontract if the subcontract qualifies as a contract or contract-like 
instrument under the definition set forth in part 13 and it falls 
within one of the four specifically enumerated types of contracts set 
forth in section 6(d)(i) of the Order and proposed Sec.  13.3(a)(1).
    Under this approach, only covered subcontracts of covered prime 
contracts are subject to the requirements of the Executive Order. 
Therefore, just as the Executive Order does not apply to prime 
contracts for the manufacturing or furnishing of materials, supplies, 
articles, or equipment, the Order likewise does not apply to 
subcontracts for the manufacturing or furnishing of materials, 
supplies, articles, or equipment. In other words, the Executive Order 
does not apply to subcontracts for the manufacturing or furnishing of 
materials, supplies, articles, or equipment between a manufacturer or 
other supplier and a contractor for use on a covered contract. For 
example, a subcontract to supply napkins and utensils to a covered 
prime contractor operating a fast food restaurant on a military base is 
not a covered subcontract for purposes of this Order. The Executive 
Order likewise does not apply to contracts under which a contractor 
orders materials from a construction materials supplier.
    The Chamber/IFA asked in their comment that the Department include 
in the Final Rule ``significantly more guidance'' regarding the 
definition of ``subcontract.'' Although the Department recognizes that 
the NPRM did not include a definition of ``subcontract,'' it notes that 
the SCA, DBA, and Minimum Wage Executive Order regulations all also 
refer to subcontracts without defining the term. The Department does 
not believe it is necessary or appropriate to develop a definition for 
the first time here. In this context as under those statutes, it is 
generally clear when a contract is a subcontract, such as when a 
contractor who enters into a covered contract to build a Federal office 
building also enters into a contract with a separate company to install 
the windows in that building. It is also generally clear when a 
contract is not a subcontract, such as when a contractor who enters 
into a covered contract with the Federal Government to build a Federal 
office building also enters into a contract with a separate company to 
repair the contractor's electronic time system or provide cleaning 
services at the contractor's corporate headquarters.
Coverage of Employees
    Proposed Sec.  13.3(a)(2) implemented section 6(d)(ii) of Executive 
Order 13706, which provides that the paid sick leave requirements of 
the Order only apply if the wages of employees under a covered contract 
are governed by the DBA, SCA, or FLSA, including employees who qualify 
for an exemption from the FLSA's minimum wage and overtime provisions. 
80 FR 54699. This coverage provision is distinct from that in Executive 
Order 13658 in that the Minimum Wage Executive Order did not cover 
employees who qualify for an exemption from the FLSA's minimum wage and 
overtime provisions. See 79 FR 9853.
    The NPRM explained the Department's interpretation that an 
employee's wages are governed by the FLSA for purposes of section 
6(d)(ii) of the Executive Order and part 13 if the employee is entitled 
to minimum wage and/or overtime compensation under sections 6 and/or 7 
of the FLSA or the employee's wages are calculated pursuant to special 
certificates issued under section 14 of the FLSA. See 29 U.S.C. 206, 
207, 214. No commenter addressed this interpretation, and the 
Department reiterates it here.
    The Department further interpreted the Order's explicit coverage of 
employees who qualify for an exemption from the FLSA's minimum wage and 
overtime provisions to mean that the Order and part 13 apply to an 
employee who would be entitled to minimum wage and/or overtime 
compensation under the FLSA but for the application of an exemption 
from the FLSA's minimum wage and overtime requirements pursuant to 
section 13 of the Act. See 29 U.S.C. 213. Such employees include those 
employed in a bona fide executive, administrative, or professional 
capacity as defined in section 13(a)(1) of the FLSA, 29 U.S.C. 
213(a)(1), and 29 CFR part 541.
    PSC objected to the application of the Order and regulations to 
employees who qualify for an exemption from the FLSA's minimum wage and 
overtime requirements, asserting that the Department had incorrectly 
interpreted the Order to include such workers. The Department disagrees 
with the commenter's reading of the Executive Order's text. Section 
6(d)(ii) of the Order explains that the paid sick leave requirements 
apply to covered contracts on which employees' wages are governed by 
the DBA, SCA, and FLSA, ``including employees who qualify for an 
exemption from its minimum wage and overtime provisions.'' 80 FR 54699. 
Consistent with the Department's interpretation of the analogous 
provision in the Minimum Wage Executive Order, this language is best 
understood to mean that employees exempt from FLSA requirements are 
among the categories of employees who, if they perform work on or in 
connection with any covered contract, are entitled to accrue and use 
paid sick leave.
    EEAC expressed concern that application of the requirements of the

[[Page 67617]]

Executive Order and part 13 to employees who qualify for an exemption 
from the FLSA's minimum wage and overtime requirements would create a 
risk that the employee could no longer properly be treated as exempt 
under the FLSA. Specifically, the commenter worried that if a 
contractor tracks such an employee's hours worked for purposes of paid 
sick leave accrual or use or if a contractor deducts pay, even if for 
less than a full day, under a bona fide plan, policy, or practice of 
providing compensation for loss of salary that results from an absence 
for which the employee uses paid sick leave, those acts would call into 
question whether the employee still qualifies for the FLSA exemptions 
described in 29 CFR part 541. The Department has explained in its 
guidance regarding 29 CFR part 541, however, that ``[c]ertain common 
payroll and recordkeeping practices do not bring into question whether 
someone is paid on a salary basis including, e.g., taking deductions 
from an exempt employee's accrued leave accounts (regardless of whether 
to cover partial-day or full-day absences); requiring exempt employees 
to keep track of and/or record their hours worked; requiring exempt 
employees to work a specified schedule of hours; and implementing bona 
fide, across-the-board changes in schedules.'' FOH ] 22g02(e).
    The Department also explained in the NPRM that it interpreted the 
Order's reference to employees whose wages are governed by the DBA to 
include laborers and mechanics who are covered by the DBA, including 
any individual who is employed on a DBA-covered contract and 
individually registered in a bona fide apprenticeship program 
registered with the Department's Employment and Training 
Administration, Office of Apprenticeship, or with a State 
Apprenticeship Agency recognized by the Office of Apprenticeship. AGC 
asked that the Department exclude laborers and mechanics--i.e., those 
workers who must receive prevailing wages pursuant to the DBA--from the 
paid sick leave requirements of the Order and part 13. Because section 
6(d)(ii) of the Executive Order explicitly refers to employees whose 
wages are governed by the DBA, the Department does not believe it would 
be appropriate to accept the commenter's suggestion.
    The Department also interpreted the language in section 6(d)(ii) of 
Executive Order 13706 and proposed Sec.  13.3(a)(2) to extend coverage 
to employees performing work on or in connection with DBA-covered 
contracts for construction who are not laborers or mechanics but whose 
wages are governed by the FLSA as provided above, including those who 
qualify for an exemption from the FLSA's minimum wage and overtime 
provisions. Although such employees are not covered by the DBA itself 
because they are not ``laborers and mechanics,'' 40 U.S.C. 3142(b), the 
NPRM noted that such individuals are employees performing work on or in 
connection with a contract subject to the Executive Order whose wages 
are governed by the FLSA, including those who qualify for an exemption 
from the FLSA's minimum wage and overtime provisions, and thus they are 
covered by section 6(d) of the Order. 80 FR 54699.
    The NPRM further explained that this coverage extends to employees 
whose wages are governed by the FLSA, including those who qualify for 
an exemption from the FLSA's minimum wage and overtime provisions, who 
are working on or in connection with DBA-covered contracts regardless 
of whether such employees are physically present on the DBA-covered 
construction worksite. MCAA, ABC, and the National Electrical 
Contractors Association (NECA) all commented unfavorably on the 
application of coverage to employees who work away from the DBA ``site 
of the work.'' These commenters are correct that DBA prevailing wages 
need only be paid to laborers and mechanics ``employed or working upon 
the site of the work,'' 29 CFR 5.5(a)(1), a term that primarily refers 
to the ``physical place or places where the building or work called for 
in the contract will remain,'' 29 CFR 5.2(k)(1)(1). The Executive Order 
applies, however, to DBA-covered contracts and to employees performing 
work on or in connection with such contracts, including employees whose 
wages are governed by the FLSA, such as employees who perform work away 
from the ``site of the work.'' The Minimum Wage Executive Order 
rulemaking included the same coverage of employees away from the site 
of the work and similarly explained that the Order's text compelled 
that result. 79 FR 60658-59.
    The Executive Order also refers to employees whose wages are 
governed by the SCA. The SCA provides that ``service employees'' 
directly engaged in providing specific services called for by the SCA-
covered contract are entitled to SCA prevailing wage rates. 41 U.S.C. 
6701(3), 6703; 29 CFR 4.152. The Department explained in the NPRM that 
these employees are covered by the plain language of section 6(d) of 
Executive Order 13706, and that it interpreted this category to include 
individuals who are employed on an SCA contract and individually 
registered in a bona fide apprenticeship program registered with the 
Department's Employment and Training Administration, Office of 
Apprenticeship, or with a State Apprenticeship Agency recognized by the 
Office of Apprenticeship. The Department received no comments regarding 
this interpretation.
    The NPRM also noted that under the SCA, ``service employees'' who 
do not perform the services required by an SCA-covered contract but 
whose duties are ``necessary to performance of the contract'' must be 
paid at least the FLSA minimum wage. 29 CFR 4.153; see also 41 U.S.C. 
6704(a). The Department proposed to interpret the language in section 
6(d)(ii) of Executive Order 13706 and proposed Sec.  13.3(a)(2) to 
extend coverage to this category of employee. It offered as an example 
an accounting clerk who processes invoices and work orders on an SCA-
covered contract for janitorial services; such an employee would likely 
not qualify as performing services required by the contract (and 
therefore would not be entitled to SCA prevailing wages), but the clerk 
would be entitled to at least the FLSA minimum wage. Therefore, the 
clerk would be covered by the Executive Order. The Department did not 
receive comments regarding this interpretation.
    The Department further noted in the NPRM that some employees 
perform work on or in connection with SCA-covered contracts but are not 
``service employees'' for purposes of the Act because that term does 
not include an individual employed in a bona fide executive, 
administrative, or professional capacity, as those terms are defined in 
the FLSA regulations at 29 CFR part 541. 41 U.S.C. 6701(3)(C). The 
Department proposed to cover these employees under section 6(d)(ii) of 
the Executive Order. For example, a contractor could employ a manager 
who meets the test for the executive employee exemption under 29 U.S.C. 
213(a)(1) and 29 CFR 541.100 to supervise janitors on an SCA-covered 
contract for cleaning services at a Federal building. Because that 
manager performs work on or in connection with a covered contract and 
qualifies for an exemption from the FLSA's minimum wage and overtime 
provisions, she would be entitled to paid sick leave as required by 
Executive Order 13706 and part 13. The Department did not receive 
comments specifically regarding this explanation, and because it is 
declining to adopt the suggestion of commenters who asked that part 13 
not apply to employees who qualify for an

[[Page 67618]]

exemption from the FLSA's minimum wage and overtime requirements, it 
also need not make any amendment to this discussion.
    The NPRM included the interpretation that where State or local 
government employees are performing work on or in connection with 
covered contracts and their wages are governed by the SCA or the FLSA, 
including employees who qualify for an exemption from the FLSA's 
minimum wage and overtime provisions, such employees are entitled to 
the protections of the Executive Order and part 13. The Department 
received no comments on this issue and reiterates its position here. As 
noted in the NPRM, the DBA does not apply to construction performed by 
State or local government employees.
    The Department received additional comments addressing the scope of 
coverage of employees. The U.S. Small Business Administration's Office 
of Advocacy (SBA Advocacy) asked whether employees who are part-time, 
seasonal, immigration visa holders, or students are covered by the 
Order and part 13. If those employees perform work on or in connection 
with covered contracts and their wages are governed by the DBA, SCA, or 
FLSA, including if they qualify for an exemption from the FLSA's 
minimum wage and overtime requirements, then they would be covered and 
entitled to paid sick leave as required by the Order and part 13. The 
ability of part-time and seasonal workers to accrue and use paid sick 
leave would be limited, but not eliminated, by their shorter work 
schedules. No special rules apply to non-citizens or students for 
purposes of this rulemaking. The U.S. Women's Chamber of Commerce asked 
that the paid sick leave requirements be extended to all private-sector 
employees. Although the Department appreciates that many workers do not 
have and would benefit from paid sick time, its authority to require 
employers to provide this benefit extends only to employees working on 
or in connection with contracts covered by the Executive Order.
On or In Connection With
    As proposed, the paid sick leave requirements of Executive Order 
13706 and part 13 apply to employees performing work ``on or in 
connection with'' covered contracts. As it had in the Minimum Wage 
Executive Order rulemaking, see 79 FR 60671-72, the Department proposed 
to interpret these terms in a manner consistent with SCA regulations, 
see, e.g., 29 CFR 4.150-4.155. In the Final Rule, the Department 
reiterates these interpretations, which it is including in the 
definition of employee in Sec.  13.2 for purposes of clarity.
    Specifically, the Department explained in the NPRM that employees 
performing ``on'' a covered contract are those employees directly 
performing the specific services called for by the contract, and 
whether an employee is performing ``on'' a covered contract would be 
determined, as explained in the Minimum Wage Executive Order Final 
Rule, 79 FR 60660, in part by the scope of work or a similar statement 
set forth in the covered contract that identifies the work (e.g., the 
services or construction) to be performed under the contract. Under 
this approach, all laborers and mechanics engaged in the construction 
of a public building or public work on the site of the work will be 
regarded as performing ``on'' a DBA-covered contract, and all service 
employees performing the specific services called for by an SCA-covered 
contract will also be regarded as performing ``on'' a contract covered 
by the Executive Order. In other words, any employee who is entitled to 
be paid DBA or SCA prevailing wages would necessarily be performing 
``on'' a covered contract. For purposes of concessions contracts and 
contracts in connection with Federal property or lands and related to 
offering services for Federal employees, their dependents, or the 
general public that are not covered by the SCA, the Department would 
regard any employee performing the specific services called for by the 
contract as performing ``on'' the covered contract.
    The Department further noted in the NPRM that it would consider an 
employee performing ``in connection with'' a covered contract to be any 
employee who is performing work activities that are necessary to the 
performance of a covered contract but who is not directly engaged in 
performing the specific services called for by the contract itself. For 
example, any employees who are not DBA-covered laborers or mechanics 
but whose services are necessary to the performance of the DBA 
contract, such as employees who do not directly perform the 
construction identified in the DBA contract either due to the nature of 
their non-physical duties and/or because they are not present on the 
site of the work, would necessarily be performing ``in connection 
with'' a covered contract. This standard, also articulated in the 
Minimum Wage Executive Order rulemaking, was derived from SCA 
regulations. See 79 FR 60659 (citing 29 CFR 4.150-4.155).
    Several commenters addressed this topic. The Small Business 
Legislative Council (SBLC) and Vigilant suggested that the Department 
not cover employees working ``in connection with'' a covered contract, 
instead limiting coverage to those employees working ``on'' covered 
contracts. The Department has considered these comments but is not 
accepting the commenters' suggestion for several reasons. First, the 
Executive Order's purpose is best fulfilled by extending its coverage 
to a broader set of employees whose work contributes to fulfillment of 
Federal contracts than only those who are directly engaged in 
performing the specific services called for by a covered contract. 
Furthermore, section 6(d) provides that an employee whose wages are 
governed by the FLSA, including an employee who qualifies for an 
exemption from the FLSA's minimum wage and overtime provisions, is 
covered regardless of which type of covered contract the employee's 
work is performed under--and the employees whose wages are governed by 
the FLSA under an SCA-covered contract are those who work ``in 
connection with'' such contracts. Finally, the coverage of employees 
working ``in connection with'' covered contracts is consistent with the 
Department's interpretation in the Minimum Wage Executive Order 
rulemaking. 79 FR 60659-60. SBLC, the American Benefits Council, 
Chamber/IFA, and the National Association of Manufacturers (NAM) all 
asked that the Department explain in greater detail which employees 
would be considered to work ``in connection with'' covered contracts. 
Specifically, some of these commenters wanted to know whether a human 
resources professional involved in the process of recruiting, 
interviewing, and/or hiring employees who perform on covered contracts 
would be included. Because finding employees to perform the work of a 
contract is necessary to the performance of the contract, such an 
employee would be working ``in connection with'' the contract for which 
he was performing such services and, if employed by the contractor, 
would be entitled to paid sick leave unless the exception described 
below applies. Similarly, an administrative assistant to an employee 
who manages the work of a contract could be working ``in connection 
with'' that contract depending on his duties. For example, if the 
assistant orders supplies the manager determines her subordinates need 
to complete the project, such tasks would be ``in connection with'' the 
contract because they are necessary to the performance of

[[Page 67619]]

the contract; on the other hand, if the assistant schedules the 
manager's meetings regarding private contracts or orders supplies to be 
used in the completion of private contracts, that work would not be 
``in connection with'' the contract.
    MCAA requested clarification of whether a construction contractor's 
off-site fabrication shop employees would be regarded as performing 
work ``in connection with'' a covered contract. Such employees would be 
performing work ``in connection with'' a covered contract to the extent 
their services are necessary to the performance of the contract. 
Methods of calculating or estimating the portion of such employees' 
hours worked in connection with covered contracts is discussed below, 
particularly in the discussion of Sec.  13.5(a)(1)(i). As MCAA notes, 
however, employees performing under contracts for the manufacturing or 
furnishing of materials, supplies, articles, or equipment to the 
Federal Government that are subject to the Walsh-Healey Public 
Contracts Act, 41 U.S.C. 6501 et seq., would not be covered by the 
Executive Order or part 13 because such contracts are not one of the 
four types of covered contracts under the Executive Order.
    The Department notes that it has included in this Final Rule, as it 
did in the Minimum Wage Executive Order rulemaking, an exception from 
coverage for employees who spend a minimal amount of time--less than 20 
percent in a workweek--working in connection with covered contracts. 
(Comments regarding that exclusion, which appears in Sec.  13.4(e), are 
addressed in the discussion of it below.) In other words, the exclusion 
would apply to an employee who spends only minimal amounts of time 
performing tasks necessary to the performance of covered contracts--
such as if the human resources professional described above interviews 
two people to work on a covered contract during a workweek in which he 
interviews 20 people for jobs on a private contract, or if the 
assistant places a single order for supplies in a workweek in which he 
spends the remainder of his worktime performing duties related to 
private contracts. In addition, this analysis occurs on a workweek-by-
workweek basis, so if the human resources professional spends most of 
his time for 2 weeks hiring workers for a covered contract and then the 
contractor for which he works takes on no new covered contract for 6 
months, the contractor would only have to permit him to accrue paid 
sick leave for those 2 weeks. If at some point during the 6 months, one 
employee on the covered contract quit and the human resources 
professional spent 2 hours of his 40-hour workweek sorting through 
resumes to find a potential replacement, although he performed work in 
connection with a covered contract, the 20 percent exclusion would 
apply and he would not need to be permitted to accrue paid sick leave 
during that workweek.
    The Department noted in the NPRM and reiterates here that the Order 
does not extend to employees who are not engaged in working on or in 
connection with a covered contract. For example, a technician who is 
hired to repair a DBA contractor's electronic time system or a janitor 
who is hired to clean the bathrooms at the DBA contractor's company 
headquarters are not covered by the Order because they are not 
performing the specific duties called for by the contract or other 
services or work necessary to the performance of the contract. 
Similarly, the Executive Order would not apply to a landscaper at the 
home office of an SCA contractor because that employee is not 
performing the specific duties called for by the SCA contract or other 
services or work necessary to the performance of the contract. And the 
Executive Order would not apply to an employee hired by a covered 
concessionaire to redesign the storefront sign for a snack shop in a 
National Park unless the redesign of the sign was called for by the 
concessions contract itself or otherwise necessary to the performance 
of the contract.
    The Department noted in the NPRM and repeats here that because the 
Order and part 13 do not apply to employees of Federal contractors who 
do no work on or in connection with a covered contract, a contractor 
could be required to provide paid sick leave to some of its employees 
but not others; in other words, it is not the case that because a 
contractor has one or more Federal contracts, all of its employees or 
projects are covered.
Geographic Scope
    Proposed Sec.  13.3(c), which was identical to 29 CFR 10.3(c) as 
promulgated in the Minimum Wage Executive Order Final Rule, see 79 FR 
60723, provided that Executive Order 13706 and part 13 would only apply 
to contracts with the Federal Government requiring performance in whole 
or in part within the United States. This interpretation was reflected 
in the Department's proposed definition of the term United States, 
which provided that when used in a geographic sense, the United States 
means the 50 States and the District of Columbia. The Department 
received no comments on this issue.
    Accordingly, the requirements of the Order and part 13 do not apply 
to contracts with the Federal Government to be performed in their 
entirety outside the geographical limits of the United States as thus 
defined. If a contract with the Federal Government is to be performed 
in part within and in part outside these geographical limits and is 
otherwise covered by the Executive Order and part 13, however, the 
requirements of the Order and part 13 would apply with respect to that 
part of the contract that is performed within the United States, i.e., 
employees would accrue paid sick leave based on their hours worked on 
or in connection with covered contracts within the United States, and 
would likewise be entitled to use accrued paid sick leave while 
performing work on or in connection with a covered contract within the 
United States.
    As noted in the NPRM, as with other instances described below in 
which employees perform some work covered by the Executive Order and 
part 13 and other work that is not, or if some employees working on or 
in connection with a covered contract do so in the United States and 
others do so outside the United States, a contractor wishing to comply 
with the Order's paid sick leave requirements as to only some employees 
on a contract or only some of an employee's hours worked must keep 
records adequately segregating non-covered work from covered work. If a 
contractor does not make and maintain such records, in the absence of 
other proof regarding the nature or location of the work, all of the 
employees' hours worked and/or all of the employees working on or in 
connection with the covered contract will be presumed to be covered by 
the Order and part 13.
Section 13.4 Exclusions
    Proposed Sec.  13.4 set forth exclusions from the Executive Order's 
requirements, including by implementing the exclusions set forth in 
section 6(f) of the Order and creating other limited exclusions from 
coverage as authorized by section 3(a) of the Executive Order. See 80 
FR 54698, 54700. Specifically, proposed Sec.  13.4(a) through (d) 
described the limited categories of contractual arrangements with the 
Federal Government for services or construction excluded from the paid 
sick leave requirements of the Executive Order and part 13, and 
proposed Sec.  13.4(e) established a narrow category of employees that 
are excluded from coverage of the Order and part 13. For the reasons 
explained below, the

[[Page 67620]]

Department adopts these provisions as proposed and adds a new, 
temporary exclusion for a particular category of employees.
    Proposed Sec.  13.4(a) implemented the statement in section 6(f) of 
Executive Order 13706 that the Order does not apply to ``grants.'' 80 
FR 54700. As it did in the Minimum Wage Executive Order rulemaking, see 
79 FR 60665-66, the Department interpreted this provision to mean that 
the paid sick leave requirements of the Executive Order and part 13 do 
not apply to grants as that term is used in the Federal Grant and 
Cooperative Agreement Act, 31 U.S.C. 6301 et seq. That statute defines 
a ``grant agreement'' as ``the legal instrument reflecting a 
relationship between the United States Government and a State, a local 
government, or other recipient when--(1) the principal purpose of the 
relationship is to transfer a thing of value to the State or local 
government or other recipient to carry out a public purpose of support 
or stimulation authorized by a law of the United States instead of 
acquiring (by purchase, lease, or barter) property or services for the 
direct benefit or use of the United States Government; and (2) 
substantial involvement is not expected between the executive agency 
and the State, local government, or other recipient when carrying out 
the activity contemplated in the agreement.'' 31 U.S.C. 6304. Section 
2.101 of the FAR similarly excludes ``grants,'' as defined in the 
Federal Grant and Cooperative Agreement Act, from its coverage of 
contracts. 48 CFR 2.101.
    Several appellate courts have also adopted this construction of 
``grants'' in defining the term for purposes of other Federal statutory 
schemes. See, e.g., Chem. Service, Inc. v. Environmental Monitoring 
Systems Laboratory, 12 F.3d 1256, 1258 (3rd Cir. 1993) (applying same 
definition of ``grants'' for purposes of 15 U.S.C. 3710a); East 
Arkansas Legal Services v. Legal Services Corp., 742 F.2d 1472, 1478 
(D.C. Cir. 1984) (applying same definition of ``grants'' in 
interpreting 42 U.S.C. 2996a). Under the proposed provision, if a 
contract qualified as a grant within the meaning of the Federal Grant 
and Cooperative Agreement Act, it would be excluded from coverage of 
Executive Order 13706 and part 13. No commenter requested a change to 
this provision, and it is adopted as proposed.
    Proposed Sec.  13.4(b) implemented the other exclusion set forth in 
section 6(f) of Executive Order 13706, which states that the Order does 
not apply to ``contracts and agreements with and grants to Indian 
Tribes under the Indian Self-Determination and Education Assistance Act 
(Pub. L. 93-638), as amended.'' 80 FR 54700. The proposed provision was 
identical to 29 CFR 10.4(b) as promulgated by the Minimum Wage 
Executive Order. See 79 FR 60723. Elk Valley Rancheria asked that the 
Department expand this provision to exclude from the Order and part 
13's coverage all contracts, agreements, and grants with Indian tribes. 
Because this provision was based on language included in the Executive 
Order that excludes only a subset of contracts and agreements with 
Indian Tribes and because expanding the exemption would not advance the 
Order's goal of ensuring that employees working on or in connection 
with other types of covered contracts have access to paid sick leave, 
the Department adopts Sec.  13.4(b) as proposed.
    Proposed Sec.  13.4(c) provided that any procurement contracts for 
construction that are not subject to the DBA are excluded from coverage 
of the Executive Order and part 13. The proposed provision was 
identical to 29 CFR 10.4(c) as promulgated by the Minimum Wage 
Executive Order Final Rule. See 79 FR 60723. The Department proposed to 
make coverage of construction contracts under the Executive Order and 
part 13 consistent with coverage under the DBA in order to assist all 
interested parties in understanding their rights and obligations under 
Executive Order 13706. The Department received no comments addressing 
this provision and adopts it as proposed.
    Similarly, proposed Sec.  13.4(d) incorporated the SCA's exemption 
of certain service contracts into the exclusionary provisions of the 
Executive Order. The proposed provision excluded from coverage of the 
Executive Order and part 13 any contracts for services, except for 
those expressly covered by Sec.  13.3(a)(1)(iii) or (iv), that are 
exempted from coverage under the SCA, pursuant to its statutory 
language at 41 U.S.C. 6702(b) or its implementing regulations, 
including those at 29 CFR 4.115 through 4.122 and 29 CFR 4.123(d) and 
(e). The Department's proposal noted that this exemption would not 
apply if the relevant service contract is expressly included within the 
Executive Order's coverage by Sec.  13.3(a)(1)(iii) or (iv). For 
example, certain types of concessions contracts are excluded from SCA 
coverage pursuant to 29 CFR 4.133(b) but are explicitly covered by 
section 6(d)(i)(C) of the Executive Order and part 13 under Sec.  
13.3(a)(1)(iii). Based on the Department's decision with regard to the 
Order's coverage of service contracts described above, the Department 
is adopting this provision as proposed.
    Several commenters asked that the Department add additional 
exclusions for certain types of contracts or contractors. The America 
Outdoors Association and River Riders asked that the Department exclude 
businesses that receive two-thirds of their revenues over 6 months of 
the year (and one-third over the remaining 6 months) and/or businesses 
whose employees work less than 4 or 6 months per year. These commenters 
asserted that it would be difficult to document the hours of employees 
who work in wilderness settings and that the costs of compliance with 
the Executive Order would be particularly high for seasonal businesses. 
River & Trail Outfitters also asked that the Department create 
exemptions for seasonal recreational businesses. After considering 
these comments, the Department has decided not to grant these requests. 
No such exemption was included in the Minimum Wage Executive Order 
rulemaking, and the intent of Executive Order 13706 is best fulfilled 
by extending its coverage broadly. The Department also notes that the 
burdens of the Executive Order and part 13 on these contractors will be 
limited because to the extent employees of these businesses must be 
paid according to the FLSA or SCA, these contractors are already 
required to keep records of the employees' hours worked, and to the 
extent they are exempt from the FLSA's minimum wage and overtime 
requirements pursuant to 29 U.S.C. 213(a)(3), 29 U.S.C. 213(b)(29), or 
any other FLSA provision, these contractors may avoid the burden of 
tracking hours worked by using the approximation permitted by Sec.  
13.5(a)(1)(iii).
    Koga Engineering and Construction, Royal Contracting Company, and 
the General Contractors Association of Hawaii requested that the 
Department exempt employers with 50 or fewer employees from the 
requirements of the Order and part 13, asserting that smaller 
contractors will not be able to afford the new systems necessary to 
segregate time employees work on DBA-covered contracts from other 
contracts. Although the Department is sensitive to the concerns of 
small businesses, it believes it is most appropriate not to grant this 
request. Under this rulemaking, prime contracts that do not meet the 
SCA, DBA, or 41 U.S.C. 1902(a) thresholds are excluded from coverage 
pursuant to a provision in the Executive Order itself, and the size of 
the contractor is not relevant to coverage. Furthermore, although the 
Department understands that small employers may not be able to afford 
expensive systems, the

[[Page 67621]]

Department believes employers can use less expensive means for tracking 
time, just as smaller contractors may use such means to comply with the 
SCA, DBA, and FLSA.
    Delta Air Lines (Delta) urged the Department to include an express 
exception for contracts with air carriers, asserting that application 
of the Order would be complicated in the airline industry and noting 
that its employees already receive paid sick leave. As Airlines for 
America (A4A) noted in its comment, many contracts with air carriers 
are already outside of the scope of the Order's coverage because they 
are exempted from the SCA by regulation. And to the extent some such 
contracts are covered, airlines' existing paid sick time policies may 
satisfy the requirements of the Order or airline employees may perform 
a sufficiently small amount of work in connection with such contracts 
that the exemption created by Sec.  13.4(e) applies. For these reasons, 
the Department is not exempting air carriers from the Order and part 
13.
    The Association of American Railroads (AAR) similarly asked the 
Department to exempt contracts with entities that are employers for 
purposes of the Railroad Unemployment Insurance Act, 45 U.S.C. 351 et 
seq., from the Executive Order's requirements, noting that most 
contracts for rail services are SCA-exempt and asserting that it would 
be extremely difficult to segregate time railroad employees spend 
working on covered and non-covered contracts. For reasons analogous to 
those described with respect to the airline industry--many contracts 
are already excluded from the Order's coverage and some employees 
already receive paid sick time or would not be entitled to paid sick 
leave, and the Department is not persuaded that application of the 
Order is inappropriate in other circumstances--the Department has 
decided not to adopt this suggestion.
    An individual commenter, Anthony Pannone, contended that the 
Department should interpret the Executive Order to apply only to 
contracts under which the contractor receives payment from the Federal 
Government, and that the Department therefore should exempt contractors 
that pay rent to, rather than receive appropriated funds from, the 
Federal Government. The Department declines to adopt this proposed 
exemption because it is inconsistent with section 6(d) of the Executive 
Order, which makes clear that the Executive Order applies to contracts 
that do not involve the payment of appropriated funds, including 
nonprocurement contracts covered by the SCA and contracts for 
concessions. Moreover, no such exemption was included in the Minimum 
Wage Executive Order rulemaking, and the intent of Executive Order 
13706 is best fulfilled by extending its coverage broadly.
    Vigilant sought clarification regarding whether the Department 
intended to cover a contract for the sale of timber by the Federal 
Government, the principal purpose of which is the harvesting and 
purchase of timber by the contractor but which also includes such 
incidental activities as building roads to access the timber, gathering 
debris for later burning or removal, and replanting the harvested 
areas. Application of the paid sick leave requirements to such a 
contract will depend, as it does for all other contracts, upon whether 
they are covered contracts under the Order and part 13--that is, 
whether they are one of the four types of contracts described in Sec.  
13.3(a)(1). To the extent such a contract is subject to the SCA or the 
DBA, it would be covered under Executive Order 13706. The Department 
also notes, however, that ``[s]o-called timber sales contracts 
generally are not subject to the [SCA] because normally the services 
provided under such contracts are incidental to the principal purpose 
of the contracts.'' 29 CFR 4.131(f) (citations omitted); see also Am. 
Fed'n of Labor & Cong. of Indus. Organizations v. Donovan, 757 F.2d 
330, 345-56 (D.C. Cir. 1985) (citing 48 FR 49736, 49751-52 (1983)).
    The NPRM also addressed exemptions for categories of employees 
rather than contracts. Specifically, proposed Sec.  13.4(e) provided 
that the accrual requirements of part 13 do not apply to employees 
performing work in connection with covered contracts, i.e., those 
employees who perform work duties necessary to the performance of the 
contract but who are not directly engaged in performing the specific 
work called for by the contract, who spend less than 20 percent of 
their hours worked in a particular workweek performing work in 
connection with such contracts. It further provided that this exclusion 
is inapplicable to employees performing work on covered contracts, 
i.e., those employees directly engaged in performing the specific work 
called for by the contract, at any point during the workweek. Finally, 
it explained that this exclusion is also inapplicable to employees 
performing work in connection with covered contracts with respect to 
any workweek in which the employees spend 20 percent or more of their 
hours worked performing work in connection with a covered contract.
    This proposed provision adopted language included in the Minimum 
Wage Executive Order Final Rule in response to comments expressing 
concern about new burdens on contractors associated with employees who 
spend an insubstantial amount of time performing work in connection 
with covered contracts (in particular, DBA-covered contractors that did 
not previously segregate hours worked by FLSA-covered employees, 
including those who were not present on the site of the construction 
work). 79 FR 60659, 60724 (codified at 29 CFR 10.4(f)). The Department 
explained in that rulemaking that it expected the exclusion to 
significantly mitigate the recordkeeping concerns identified by 
commenters without substantially affecting the Executive Order's 
economy and efficiency interests, and noted that it has used a 20 
percent threshold for other purposes in the SCA and DBA contexts. 79 FR 
60660 (citing 29 CFR 4.123(e)(2); FOH ]] 15e06, 15e10(b), 15e16(c), and 
15e19).
    SBLC asked that the Department modify the Sec.  13.4(e) exclusion 
to apply to employees performing work in connection with covered 
contracts who spend less than 50, rather than 20, percent of their 
hours worked in a particular workweek performing work in connection 
with such contracts. The Department has decided not to adopt this 
suggestion. This exclusion was intended to relieve contractors from 
potential burden without depriving employees who would otherwise be 
entitled to accrue and use meaningful amounts of paid sick leave--as 
would be the case for employees who spend a significant portion of 
their work time performing covered work--of that benefit. Finally, as 
noted, this provision is based on an exclusion included in the Minimum 
Wage Executive Order Final Rule, and the Department believes it would 
cause confusion to have different tolerances in these otherwise 
identical provisions that will be applied to many of the same 
employees. Accordingly, the Department adopts the provision as proposed 
and reiterates the discussion in the NPRM regarding how the provision 
will operate.
    As explained in the NPRM, like the exclusion created for purposes 
of the Minimum Wage Executive Order rulemaking, 79 FR 60659-62, this 
exclusion will not apply to any employee performing ``on,'' rather than 
``in connection with,'' a covered contract at any point during the 
workweek. If an employee spends any time performing work on a covered

[[Page 67622]]

contract in a workweek and that employee's wages are governed by the 
DBA, SCA, or FLSA, including employees who qualify for an exemption 
from the FLSA's minimum wage and overtime provisions, the employee will 
be entitled to accrue and use paid sick leave pursuant to the Executive 
Order as to all time performing work on or in connection with covered 
contracts in that workweek. For an employee solely performing ``in 
connection with'' a covered contract, however, the Executive Order's 
paid sick leave accrual requirements will only apply if that employee 
spends 20 percent or more of her hours worked in a given workweek in 
connection with covered contracts. Therefore, in order to apply this 
exclusion correctly, contractors must accurately distinguish between 
employees performing ``on'' a covered contract and those employees 
performing ``in connection with'' a covered contract. As explained 
above, employees directly performing the specific services called for 
by the contract are performing work ``on'' a covered contract. This 
category includes any employee who is entitled to be paid DBA or SCA 
prevailing wages, regardless of whether such covered work constitutes 
less than 20 percent of the employee's overall hours worked in a 
particular workweek.
    This exclusion could apply, however, to any employees who are not 
directly engaged in performing the specific construction identified in 
a DBA contract (i.e., they are not DBA-covered laborers or mechanics) 
but whose services are necessary to the performance of the DBA 
contract, such as employees who do not directly perform the 
construction identified in the DBA contract either due to the nature of 
their non-physical duties and/or because they are not present on the 
site of the work, but whose duties would be regarded as essential for 
the performance of the contract. For example, Sec.  13.4(e) could apply 
to a security guard patrolling or monitoring a construction worksite 
where DBA-covered work is being performed or a clerk who processes the 
payroll for DBA contracts (either on or off the site of the work). If 
the security guard or clerk also performed the duties of a DBA-covered 
laborer or mechanic (for example, by painting or moving construction 
materials), however, the exclusion would not apply to any hours worked 
on or in connection with the contract in that workweek because that 
employee performed ``on'' the covered contract at some point in the 
workweek.
    Similarly, any employees performing work in connection with an SCA 
contract who are not entitled to SCA prevailing wages but are, because 
they perform work ``in connection with'' an SCA-covered contract, 
entitled to at least the FLSA minimum wage could fall within the scope 
of the exclusion provided their work falls below the 20 percent 
threshold. For example, the exclusion could apply to an accounting 
clerk who processes a few invoices for SCA contracts out of hundreds of 
other invoices for non-covered contracts during the workweek or a human 
resources employee who assists for short periods of time in the hiring 
of the employees performing work on the SCA-covered contract in 
addition to the hiring of employees on other non-covered projects.
    With respect to concessions contracts and contracts in connection 
with Federal property or lands and related to offering services, the 
Sec.  13.4(e) exclusion could apply to any employees performing work in 
connection with such contracts who are not at any time directly engaged 
in performing the specific services identified in the contract but 
whose services or work duties are necessary to the performance of the 
covered contract. One example of an employee who could qualify for this 
exclusion is a clerk who handles the payroll for a child care center 
that leases space in a Federal building as well as the center's other 
locations that are not covered by the Executive Order and thus does not 
spend 20 percent or more of his time handling payroll for the child 
care center in the Federal building.
    Importantly, as noted in the NPRM and the Minimum Wage Executive 
Order rulemaking, 79 FR 60661-62, a contractor seeking to rely on this 
exclusion must correctly determine the hours worked, make and maintain 
records (or have other affirmative proof) that the employee did not 
work ``on'' a covered contract, and appropriately segregate the hours 
worked by the employee in connection with the covered contract from 
other work not subject to the Executive Order. A contractor may apply 
this exception on the basis of an estimate of the employee's work time 
in connection with covered contracts, as discussed in more detail with 
respect to the final text of Sec.  13.5(a)(1)(i), but in that case, the 
estimate must be reasonable and based on verifiable information. In the 
absence of records or other proof demonstrating that an employee did 
not work ``on'' a covered contract and adequately segregating non-
covered work from the work performed in connection with a covered 
contract (or proof that the estimate of the employee's work time in 
connection with covered contracts is reasonable and based on verifiable 
information), the exclusion will not apply, and employees who work in 
connection with a covered contract will be presumed to have spent all 
work time performing such work throughout the workweek.
    The quantum of affirmative proof necessary to support reliance on 
the exclusion will vary with the circumstances. For example, it may 
require considerably less affirmative proof to satisfy the Sec.  
13.4(e) exclusion with respect to an accounting clerk who only 
occasionally processes an SCA-contract-related invoice than would be 
necessary to establish the exclusion with respect to a security guard 
who works on a DBA-covered site for at least several hours each week.
    Finally, as noted in the discussion of this exclusion in the NPRM, 
in calculating hours worked by a particular employee in connection with 
covered contracts for purposes of determining whether this exclusion 
may apply, contractors must determine the aggregate amount of hours 
worked on or in connection with covered contracts in a given workweek 
by that employee. For example, if an administrative assistant works for 
a single employer 40 hours per week and spends 2 hours each week 
handling payroll for each of four separate SCA contracts, the 8 hours 
that the employee spends performing work in connection with the four 
covered contracts must be aggregated for each workweek in order to 
determine whether the exclusion applies. In this case, the exclusion 
would not apply because the employee's hours worked in connection with 
the SCA contracts constitute 20 percent of her total hours worked for 
that workweek. As a result, the 8 hours that the employee spends 
performing work in connection with the four covered contracts each 
workweek would count toward the accrual of paid sick leave.
    The Department also received several requests regarding the 
application of Executive Order 13706 and part 13 to employees 
performing work on or in connection with covered contracts whose 
conditions of employment are governed by a CBA. Seyfarth Shaw suggested 
exempting a contract from the Executive Order's requirements if a CBA 
applies to the work performed under the contract; the American Benefits 
Council and the Chamber/IFA suggested exempting a contract from the 
Executive Order's requirements if a CBA that provides for at least 7 
days of paid sick time applies to the work performed

[[Page 67623]]

under the contract; the AFL-CIO as well as the Chamber/IFA suggested 
exempting a contract from the Executive Order's requirements if a CBA 
applies to the work performed under the contract until after the 
current CBA expires, so that negotiations taking the Executive Order 
into account can occur; and Seyfarth Shaw offered as an alternative 
exempting a contract from the Executive Order's requirements if a CBA 
that explicitly waives the rights in the Executive Order applies to the 
work performed under the contract. Other commenters, such as the Sheet 
Metal and Air Conditioning Contractors' National Association (SMACNA) 
and MCAA, also suggested exempting contracts to which CBAs apply, but 
only with respect to narrower sets of construction contracts.
    After careful consideration of these comments, the Department has 
included a new, temporary exclusion from the requirements of the Order 
and part 13 for employees whose work is governed by certain CBAs. 
Specifically, the new provision, Sec.  13.4(f), provides that if a CBA 
ratified before September 30, 2016 applies to an employee's work 
performed on or in connection with a covered contract and provides the 
employee with at least 56 hours (or 7 days) of paid sick time (or paid 
time off that may be used, among other purposes, for reasons related to 
sickness or health care) each year, the requirements of the Executive 
Order and part 13 do not apply to the employee until the earlier of the 
date the agreement terminates or January 1, 2020. This provision 
balances the importance of ensuring that the Executive Order applies to 
all employees entitled to its benefits promptly against the 
complications that could arise where an existing CBA provides for paid 
sick time in a manner that is similar to, but not sufficient to meet 
the requirements of, the paid sick leave provisions of part 13. These 
complications are significant in circumstances involving CBAs because 
the agreement will limit a contractor's ability to unilaterally change 
the terms of the leave it requires to be provided. Similarly, the new 
Sec.  13.4(f) provides that if a CBA ratified before September 30, 2016 
applies to an employee's work performed on or in connection with a 
covered contract and provides the employee with paid sick time (or paid 
time off that may be used, among other purposes, for reasons related to 
sickness or health care) each year, but the amount provided under the 
CBA is less than 56 hours (or 7 days, if the CBA refers to days rather 
than hours), the contractor must provide covered employees with the 
difference between 56 hours (or 7 days) and the amount provided under 
the existing CBA. For example, if a CBA ratified before September 30, 
2016 applies to an employee's work performed on or in connection with a 
covered contract and provides the employee with 20 hours of paid sick 
time each year, the contractor, in order to avail itself of the Sec.  
13.4(f) exemption, would be required under this Final Rule to allow the 
employee to accrue and use an additional 36 hours of paid sick time in 
that year, for a total of 56 hours. A contractor must provide such 
``top up'' leave in a manner consistent with either the provisions of 
the Executive Order and part 13 or the terms and conditions of its CBA. 
If a CBA does not provide any paid sick time (or paid time off that 
could be used for an unlimited or broader range of reasons than paid 
sick time, but including reasons related to being sick or seeking 
health care), a contractor will be responsible for full compliance with 
the Order and part 13 pursuant to the effective date of this rule and 
the definition of a ``new contract.''
    This temporary exclusion applies to employees rather than contracts 
because on any covered contract, some employees' work might be governed 
by a CBA while others' work is not. For example, laborers and mechanics 
working on a DBA contract might be members of a union that has 
negotiated a CBA with the contractor, but the administrative staff 
performing work in connection with the contract might not be covered by 
the CBA. Or a CBA could apply to janitors working on an SCA contract 
but not their supervisor. As to employees to whom a CBA does not apply, 
a contractor must provide access to paid sick leave without reliance on 
this exception.
    In addition, the temporary exclusion applies to any paid sick time 
policy or other paid time off policy under a CBA that allows employees 
to take leave for reasons related to sickness or health care. Such 
policies need not permit employees to be absent for all of the reasons 
required under Sec.  13.5(c)(1); for example, if a paid sick time 
policy under a CBA allowed an employee to use leave if she is sick but 
not to care for family members, or if a paid sick time policy does not 
permit leave for reasons related to domestic violence, sexual assault, 
or stalking other than seeking health care, the exclusion can still 
apply. Adjustments to the reasons for which an employee may use paid 
leave are among those changes that a contractor that is party to a CBA 
might be unable to make unilaterally.
    Finally, the Department notes it has included a date--January 1, 
2020--by which all contractors taking advantage of this limited 
exception must come into compliance with the paid sick leave 
requirements regardless of whether an applicable CBA has yet 
terminated. The Department believes delaying the application of the 
Executive Order by more than 3 years after the effective date of this 
rulemaking, which could occur if a CBA with an extended term is in 
place, is inappropriate, and parties to the CBA will have 3 full years 
to take any actions necessary to prepare for compliance.
    SHRM/CUPA-HR also asked in their comment for a different exception 
for certain employees. They requested that the Department exclude 
graduate research assistants, i.e., students who perform research under 
grants or contracts as part of the pursuit of an advanced degree, from 
the requirements of the Order and part 13, asserting that it would be 
problematic to cover these workers because it would be difficult to 
segregate their covered and non-covered hours worked. The Department 
does not believe a provision specific to graduate research assistants 
is necessary or appropriate in this context. Application of the paid 
sick leave requirements to such assistants will depend, as it does for 
all other workers, upon whether they meet the definition of employee 
under part 13--that is, whether their wages are governed by the SCA, 
DBA, or FLSA, including if they qualify for an exemption from the 
FLSA's minimum wage and overtime requirements--and are performing work 
on or in connection with a covered contract. Graduate research 
assistants, whether or not they qualify as employees as defined for 
purposes of the Order, may often perform work on or in connection with 
Federal grants that are excluded from the Order's coverage. To the 
extent such assistants' work is covered by the Order and part 13 and 
therefore the commenters' concern about segregating time is relevant, 
the Department notes that it has created additional flexibility for 
contractors who would have difficulty segregating the covered and non-
covered hours worked of employees who perform work in connection with 
covered contracts, as described in the discussion of Sec.  13.5(a)(1) 
below.
    The Department noted in the NPRM that the Minimum Wage Executive 
Order rulemaking contained additional exclusions for certain categories 
of employees that were not replicated in the proposed rule. 
Specifically, under the Minimum Wage Executive Order regulations, 
employees whose wages are not governed by section 206(a)(1) of the

[[Page 67624]]

FLSA because of the applicability of exemptions under section 213(a) 
are not entitled to the protections of Executive Order 13658. 29 CFR 
10.4(e)(3). For the reasons explained in the discussion of coverage of 
employees above, no such exclusion exists in this rulemaking. 
Additionally, the Minimum Wage Executive Order does not apply to 
employees whose wages are calculated pursuant to special certificates 
issued under 29 U.S.C. 214(a) or (b), 29 CFR 10.4(e)(1), (2), but the 
Department did not propose to incorporate an exclusion for any such 
employees in the proposed rule under this Order. The NPRM explained 
that because it interpreted Executive Order 13706 to be intended to 
apply to a broad range of employees, the Order explicitly applies to 
employees whose wages are governed by the FLSA, and the Order (unlike 
the Minimum Wage Executive Order) contains no reference to any category 
of employees whose wages are calculated pursuant to special 
certificates, it proposed to interpret Executive Order 13706 to apply 
to all employees whose wages are calculated pursuant to special 
certificates under section 14 of the FLSA. No commenter asked that the 
Department exclude employees whose wages are calculated pursuant to 
special certificates issued under 29 U.S.C. 214(a) or (b), and 
therefore no such provision is adopted.
Section 13.5 Paid Sick Leave for Federal Contractors and Subcontractors
    Proposed Sec.  13.5 implemented section 2 of Executive Order 13706 
by setting forth rules and restrictions regarding the accrual and use 
of paid sick leave. It is adopted in significant part as proposed but 
with modifications in response to comments as described below.
    Proposed Sec.  13.5(a) addressed the accrual of paid sick leave. 
First, proposed Sec.  13.5(a)(1) implemented section 2(a) of Executive 
Order 13706, 80 FR 54697, by providing that a contractor shall permit 
an employee to accrue not less than 1 hour of paid sick leave for every 
30 hours worked on or in connection with a covered contract. It further 
provided that a contractor shall aggregate an employee's hours worked 
on or in connection with all covered contracts for that contractor for 
purposes of paid sick leave accrual. As the NPRM explained, under this 
approach, if, for example, a subcontractor that installs windows in 
building construction projects sends a single employee to three 
separate DBA-covered projects, all the time the employee spends on all 
worksites--whether during the same or different pay periods--for the 
subcontractor must be added together to determine how much paid sick 
leave the employee has accrued. If in one pay period the employee spent 
20 hours at Site A and 10 hours at Site B, she would have accrued 1 
hour of paid sick leave at the end of that pay period; if in the next 
pay period the employee spent 30 hours at Site C, she would then have a 
total accrual of 2 hours of paid sick leave. As for an employee who 
falls within the Sec.  13.4(e) exclusion in some workweeks but not 
others, only the employee's hours worked on or in connection with 
covered contracts during workweeks in which the exclusion does not 
apply would count toward accrual of paid sick leave. The Department 
received no comments regarding these portions of Sec.  13.5(a)(1) and 
adopts them as proposed.
    Proposed Sec.  13.5(a)(1)(i) explained that for purposes of 
Executive Order 13706 and part 13, ``hours worked'' would include all 
time for which an employee is or should be paid, meaning time an 
employee spends working or in paid time off status, including time when 
the employee is using paid sick leave or any other paid time off 
provided by the contractor. The proposed definition was different from 
the use of the term ``hours worked'' in other contexts and was to apply 
only for purposes of the Executive Order. It included (but was broader 
than) all time considered ``hours worked'' for purposes of the SCA and 
the FLSA, i.e., all time an employee is suffered or permitted to work. 
29 CFR 4.178; 29 CFR 785.11.
    The Department explained that its proposed interpretation of 
``hours worked'' under Executive Order 13706 to additionally include 
paid time off, although distinct from the FLSA and SCA definitions of 
the term, was analogous to the accrual of vacation leave under the SCA, 
where absences from work (with or without pay) generally count toward 
satisfaction of length of service requirements for vacation benefits. 
29 CFR 4.173(b)(1). It was also consistent with the OPM regulation 
regarding leave accrual by federal employees, which provides that an 
employee accrues leave each pay period based on time she is ``in a pay 
status.'' 5 CFR 630.202(a). The Department's proposed interpretation 
reflected its view that basing paid sick leave accrual on all time an 
employee is in pay status, rather than merely on when the employee is 
suffered or permitted to work, would be administratively easier (or no 
more difficult) for contractors to implement. The Department further 
noted in the NPRM that this interpretation generally would have minimal 
impact on the rate of an employee's accrual of paid sick leave and, 
with respect to many employees who work at least full time (or 
potentially even less) each week on or in connection with covered 
contracts, would have no impact on the total amount of paid sick leave 
accrued per year because such employees will reach the maximum 56 hours 
within each accrual year regardless of whether paid time off is 
included.
    Many commenters, including the National Partnership, CAP Women's 
Initiative, NELP, NETWORK Lobby for Catholic Social Justice (NETWORK), 
Women Employed, and the AFL-CIO expressed support for the NPRM's 
definition of hours worked. But other commenters opposed it: Koga 
Engineering and Construction, Royal Contracting Company, Master Sheet 
Metal, Inc., the General Contractors Association of Hawaii, and 
Vigilant wrote that it is a basic premise of accruing leave that 
workers earn time off by working, EEAC believed it would be appropriate 
for ``hours worked'' to have the same meaning for purposes of this 
rulemaking as it does in the FMLA context; the SBLC believed the 
proposed definition would discourage employers from having generous 
time off policies; and the American Benefits Council, Seyfarth Shaw, 
and the Chamber/IFA commented that the proposed definition would be 
confusing to administer because it differs from State and local paid 
sick time laws.
    After considering the input received from commenters, the 
Department has decided to change the definition of hours worked such 
that it does not include paid time off. Instead, the term ``hours 
worked'' will have the same meaning for purposes of Executive Order 
13706 and part 13 as it does under the Fair Labor Standards Act, as 
described in 29 CFR part 785. The Department anticipates that this 
change will make administration of paid sick leave easier for those 
contractors who are familiar with this definition under other statutes 
and/or already apply it for purposes of complying with a State or local 
paid sick time law. Any contractor that prefers to calculate its 
employees' paid sick leave accrual based on hours worked and hours 
spent in paid time off status is permitted, though not required, to do 
so.
    As it did in the NPRM, the Department reiterates that a contractor 
would only be required to count hours worked on or in connection with a 
covered contract, rather than hours worked on or in connection with a 
non-covered contract, toward paid sick leave accrual. For example, if 
an employee works on an SCA-covered contract for

[[Page 67625]]

security services for 30 hours each pay period and works for the same 
contractor on a private contract for security services for an 
additional 30 hours each pay period, the contractor would only be 
required to allow that employee to accrue 1, rather than 2, hours of 
paid sick leave each pay period. Similarly, if an employee works for 
one contractor on a DBA-covered contract for construction for 2 months 
and then on a private contract for construction for 2 months, the 
contractor would only be required to allow the employee to accrue paid 
sick leave during the first 2 months. But the Department proposed to 
require contractors who wish to distinguish covered and non-covered 
hours worked for purposes of paid sick leave accrual to keep records 
that clearly reflect that distinction.
    Specifically, proposed Sec.  13.5(a)(1)(i) explained that to 
properly exclude time spent on non-covered work from an employee's 
hours worked that count toward the accrual of paid sick leave, a 
contractor must accurately identify in its records the employee's 
covered and non-covered hours worked. The Department's proposal 
explained that, in the absence of records or other proof adequately 
segregating the time--whether because of a contractor's inadequate 
recordkeeping, because the contractor preferred permitting the employee 
to more rapidly accrue paid sick leave rather than keeping such 
records, or for another reason--the employee would be presumed to have 
spent all paid time performing work on or in connection with a covered 
contract. This proposed policy was consistent with the treatment of 
hours worked on SCA- and non-SCA-covered contracts, see 29 CFR 4.178, 
4.179, as well as the treatment of covered versus non-covered time 
under the Minimum Wage Executive Order rulemaking, see 79 FR 60660-61, 
60672.
    Several commenters expressed concern about segregating employees' 
covered and non-covered work time. SBA Advocacy wrote that such 
segregation would be difficult, in particular in the construction 
industry in which employees move between work on different contracts, 
for seasonal recreational businesses in which employees work in remote 
locations, and for contractors in general as to employees who do not 
work directly on contracts, such as accounting, delivery, and 
management staff. DLA Piper and the HR Policy Association asked for 
more information about the type of proof that would be sufficient; DLA 
Piper asked whether, for example, a list or copies of all invoices 
processed by an accounting clerk, including some that relate to covered 
contracts, would be required. EEAC, PSC, and DLA Piper asked if, with 
respect to employees working in connection with covered contracts (such 
as receptionists and mail room clerks), contractors would be permitted 
to make estimates based on a contractor's revenue or some other basis.
    The Department believes that in most circumstances it will be 
simple, or at least practicable, to distinguish an employee's work on a 
covered contract from time spent on non-covered contracts, such as when 
a mechanic spends some time at a site of construction on a DBA-covered 
contract and some time at a site of construction on a private contract. 
But it appreciates that segregation of time will be more complicated in 
circumstances in which an employee works only in connection with 
covered contracts, such as, as the commenters noted, when a 
receptionist answers phone calls, or a mail room clerk sorts mail, 
regarding numerous projects, or when, as MCAA and SMACNA recognized, a 
contractor has employees in its off-site fabrication shop prefabricate 
pipe assemblies or ducts for delivery and installation at projects 
undertaken pursuant to both covered and non-covered contracts. 
Therefore, the Department has added to Sec.  13.5(a)(1)(i) a statement 
allowing a contractor to estimate the portion of an employee's hours 
worked spent in connection with (but not on) covered contracts provided 
the estimate is reasonable and based on verifiable information.
    As suggested by the commenters, such information could include the 
portion of a contractor's total revenue that derives from covered 
contracts if it is reasonable to assume that an employee's work time is 
roughly evenly divided across all of the contractor's work. If, for 
example, a contractor derives half of its revenue from covered 
contracts, the contractor would likely have a reasonable basis for 
estimating that employees in the mail room of the contractor's 
corporate headquarters spend half of their hours worked in connection 
with covered contracts. But if that contractor has offices in two 
locations, and all of its work at one of those locations pertains to 
covered contracts, the contractor could not reasonably assume that the 
staff in the mail room at that location worked in connection with 
covered contracts only 50 percent of the time.
    An estimate of this type based on information other than a 
contractor's revenue could also be appropriate. For example, a 
contractor could estimate that a receptionist who handles incoming 
calls for a group of other employees who work on covered contracts 
during, on average, one third of their work time also spends one third 
of her hours worked in connection with covered contracts. Like the 
basis for an estimate, the period of time for which an estimate could 
appropriately be used would also vary depending upon the circumstances; 
for example, a contractor that claims the Sec.  13.4(e) exclusion for 
its receptionist because at the time, only 5 percent of its revenue 
derived from covered contracts would not be able to continue to do so 
if the contractor is awarded a new covered contract that will account 
for 40 percent of its revenue for the next year.
    Proposed Sec.  13.5(a)(1)(ii) required a contractor to calculate an 
employee's accrual of paid sick leave no less frequently than at the 
conclusion of each workweek. The Department explained in the NPRM that 
it considered ``workweek'' to have the meaning explained in the FLSA 
regulations, i.e., a fixed and regularly recurring period of 168 
hours--seven consecutive 24-hour periods--that need not coincide with 
the calendar week but must generally remain fixed for each employee. 
See 29 CFR 778.105. NECA, SBLC, Vigilant, and the National Defense 
Industrial Association (NDIA) urged the Department not to adopt this 
provision as proposed, asserting that contractors' systems are 
configured to account for time each pay period rather than as 
frequently as once a week. Several of these commenters requested that 
instead, the Department require accrual at the end of each pay period 
or, if contractors' pay periods occur less frequently than twice a 
month, then at least that often. The Department is adjusting the 
regulatory text based on these comments. Rather than requiring that 
paid sick leave accrue no less frequently than at the end of each 
workweek, Sec.  13.5(a)(1)(ii) will require that accrual occur no less 
frequently than at the conclusion of each pay period or each month, 
whichever interval is shorter. This provision has no effect on a 
contractor's obligation under the SCA to have semimonthly (or more 
frequent) pay periods, see 29 CFR 4.6(h), or under the DBA to have 
weekly pay periods, see 40 U.S.C. 3142(c)(1), 29 CFR 5.5(a)(3). The 
Department anticipates that this added flexibility will benefit those 
contractors who currently track hours worked less frequently than each 
week, although it notes that contractors may still choose to calculate 
paid sick leave accrual each week, and will be required to do so if 
they have weekly pay periods. This

[[Page 67626]]

change is also consistent with modifications to proposed Sec.  
13.5(a)(2), described below.
    Proposed Sec.  13.5(a)(1)(ii) also provided that a contractor was 
not required to allow employees to accrue paid sick leave in increments 
smaller than 1 hour for completion of any fraction of 30 hours worked. 
In other words, under the proposal, an employee could accrue 1 hour of 
paid sick leave after working a full 30 hours, rather than accruing any 
fraction of an hour for any fraction of 30 hours worked. Proposed Sec.  
13.5(a)(1)(ii) further required any remaining fraction of 30 hours to 
be added to hours worked for the same contractor in subsequent 
workweeks to reach the next 30 hours worked provided that the next 
workweek in which the employee performs on or in connection with a 
covered contract occurs within the same accrual year. (The term accrual 
year is defined in proposed Sec.  13.2 and addressed in the discussion 
of Sec.  13.5(b)(1) below.) Vigilant expressed approval of these 
provisions, and the Department adopts them essentially as proposed, 
although the references to ``workweeks'' have been changed to ``pay 
periods'' for consistency with the change to the first sentence of the 
provision.
    The NPRM included an example of how Sec.  13.5(a)(1)(ii) would 
operate in practice. The Department provides a similar example here, 
although it has modified the specifics to reflect how accrual would 
occur at the end of a pay period rather than after each workweek. 
Assume a contractor has 2-week pay periods, and an employee works on a 
covered concessions contract for 80 hours in pay period 1 and 35 hours 
in pay period 2. At the conclusion of pay period 1, the employee will 
have accrued 2 hours of paid sick leave based on his first 60 hours 
worked and, unless the employer chooses to allow accrual in increments 
smaller than 1 hour, will not have accrued any more paid sick leave 
based on the additional 20 hours he worked in that pay period. At the 
conclusion of pay period 2, the employee will have accrued 1 additional 
hour of paid sick leave based on the remaining 20 hours from pay period 
1 plus his first 10 hours worked in pay period 2. The employee need not 
have accrued any paid sick leave based on the remaining 25 hours worked 
during pay period 2 (because 25 is less than 30). If the employee 
spends several subsequent weeks working for the contractor on a private 
contract and then returns to working on the covered concessions 
contract, under this provision, those remaining 25 hours would be added 
to his subsequent hours worked on the concessions contract for purposes 
of reaching his next accrued hour of paid sick leave (provided his 
return to the covered concessions contract occurred within the same 
accrual year as pay period 2). As noted in the proposal, an employer 
might wish to permit employees to accrue paid sick leave in fractions 
of an hour, perhaps because it finds the related recordkeeping less 
burdensome than keeping track of hours worked from previous workweeks, 
it allows for use of paid sick leave in increments smaller than 1 hour, 
or for some other reason. An employer may elect to do so provided all 
hours worked for the contractor on or in connection with covered 
contracts within the accrual year are counted toward an employee's paid 
sick leave accrual.
    Proposed Sec.  13.5(a)(1)(iii) addressed the accrual of paid sick 
leave for employees as to whom contractors are not obligated by another 
statute to keep records of hours worked. As the Department explained in 
the NPRM, for most employees on covered contracts, such as service 
employees on SCA-covered contracts, laborers and mechanics on DBA-
covered contracts, and all employees performing work on or in 
connection with any covered contract whose wages are governed by the 
FLSA, contractors are already obligated by the SCA, DBA, or FLSA to 
keep records of employees' hours worked. 29 CFR 4.6(g)(1)(iii), 4.185 
(SCA); 29 CFR 5.5(a)(3)(i) (DBA); 29 CFR 516.2(a)(7), 516.30(a) (FLSA). 
Therefore, as to those employees, contractors are already collecting 
the information necessary to calculate the accrual of paid sick leave. 
But for those employees who are employed in a bona fide executive, 
administrative, or professional capacity, as those terms are defined in 
29 CFR part 541, contractors are not currently required by the SCA, 
DBA, or FLSA to keep such records. See 29 CFR 4.6(g)(1)(iii), 4.156, 
4.185 (requiring that records be kept for ``service employees'' to whom 
the SCA applies and excluding from that category ``persons employed in 
an executive, administrative, or professional capacity as those terms 
are defined in 29 CFR part 541); 29 CFR 5.5(a)(3)(i), 5.2(m) (requiring 
that records be kept for ``laborers and mechanics'' to whom the DBA 
applies and excluding from those terms ``[p]ersons employed in a bona 
fide executive, administrative, or professional capacity as defined in 
part 541 of this title''); 29 CFR 516.3 (excusing employers of ``each 
employee in a bona fide executive, administrative, or professional 
capacity . . . as defined in part 541 of this chapter'' from the FLSA 
requirement to maintain and preserve records of hours worked).
    In order not to impose a new recordkeeping burden on employers of 
such employees, proposed Sec.  13.5(a)(1)(iii) allowed contractors to 
choose to continue not to keep records of such employees' hours worked, 
but instead to allow the employees to accrue paid sick leave as though 
the employees were working on or in connection with a covered contract 
for 40 hours per week. Contractors could, under the proposed provision, 
choose to calculate paid sick leave accrual by tracking the employee's 
actual hours worked provided they permitted the relevant employees to 
accrue paid sick leave based on their actual hours worked consistently 
across workweeks rather than, for example, using the 40 hours 
assumption in workweeks during which an employee works more than 40 
hours but not those in which the employee works fewer. Under the 
proposed approach, the Department would apply these principles to any 
employees exempt from the FLSA's minimum wage and overtime provisions 
and not covered by the SCA or DBA. The Department explained in the NPRM 
that this approach is consistent with FMLA recordkeeping regulations, 
under which there is a general requirement that FMLA-covered employers 
keep records of hours worked by employees eligible for FMLA leave but 
an exception with respect to employees who are not covered by or are 
exempt from the FLSA; employers of those employees need not keep such 
records so long as the employer presumes that the employees have met 
the hours requirement for FMLA eligibility. See 29 CFR 825.500(c)(1), 
(f). The Department received a supportive comment from Vigilant 
regarding the proposal to allow contractors to use this 40 hours 
assumption, and it adopts it as proposed.
    Proposed Sec.  13.5(a)(1)(iii) also provided that if an employee as 
to whom an employer is not otherwise required to keep a record of hours 
worked regularly works fewer than 40 hours per week on or in connection 
with covered contracts, whether because the employee's time is split 
between covered and non-covered contracts or because the employee is 
part-time, the contractor could allow the employee to accrue paid sick 
leave based on the employee's typical number of hours worked on covered 
contracts per workweek. The Department further explained in the NPRM 
that, although the contractor need not keep records of

[[Page 67627]]

the employee's hours worked each week, to use a number less than 40 for 
this purpose, the contractor was required to have probative evidence of 
the employee's typical number of covered hours worked, such as payroll 
records showing that an employee who performs on a covered contract was 
paid for only 20 hours per week by the contractor.
    PSC expressed concern about ``intrusive second-guessing by [the 
Department's] auditors'' regarding the determination of an employee's 
usual time spent on or in connection with covered contracts and 
suggested that the Department revise this provision to state that it 
would presume a contractor's estimate of the portion of time an 
employee exempt from the FLSA's minimum wage and overtime requirements 
spends working in connection with covered contracts is reasonable 
unless countered by a preponderance of the evidence. The Department is 
not adopting this suggestion because of the incentives it would create; 
more specifically, it would likely reward any contractor that chose not 
to keep records that could be the basis for a sound determination of 
how much time employees spend working in connection with covered 
contracts.
    The Department has, however, modified the proposed regulatory text 
to alleviate the concerns of PSC and other commenters regarding the 
tracking of time of employees who work exclusively in connection with, 
rather than on, covered contracts. Specifically, Sec.  13.5(a)(1)(iii) 
now provides that a contractor must have probative evidence to support 
using an assumed typical number of hours worked on or in connection 
with covered contracts that is less than 40 or, if the employee 
performs work in connection with rather than on covered contracts, a 
contractor may estimate the employee's typical number of hours worked 
in connection with covered contracts per workweek provided the estimate 
is reasonable and based on verifiable information. This language is the 
same as that used in Sec.  13.5(a)(1)(i) with respect to employees as 
to whom contractors are obligated to track hours worked and is intended 
to provide the same flexibility for contractors as to employees who 
qualify for an exemption from the FLSA's minimum wage and overtime 
requirements.
    Proposed Sec.  13.5(a)(2) required a contractor to inform an 
employee, in writing, of the amount of paid sick leave that the 
employee has accrued but not used (i) no less than monthly, (ii) at any 
time when the employee makes a request to use paid sick leave, (iii) 
upon the employee's request for such information, but no more often 
than once a week, (iv) upon a separation from employment, and (v) upon 
reinstatement of paid sick leave pursuant to Sec.  13.5(b)(3). Some of 
these requirements were based on FMLA regulations regarding 
notification to an employee of how much leave will be or has been 
counted against her FMLA entitlement, see 29 CFR 825.300(d)(6), but 
they were modified to account for the differences between FMLA leave 
and paid sick leave, including in the method of accrual. The fourth and 
fifth requirements were meant to ensure that employees who may be and 
ultimately are rehired by a contractor know how much paid sick leave 
they should and do have available upon such rehiring. In the NPRM, the 
Department explained that it was important that employees be able to 
determine whether absences will be paid (so they can, for example, 
schedule their own or their family members' doctors' appointments to 
occur after they have accrued sufficient paid sick leave), and that 
these notification requirements would not create a significant burden 
for contractors.
    CPD, NWLC, the National Council of Jewish Women, Greater New 
Orleans Section, the National Association of Social Workers, the State 
Innovation Exchange, and the Coalition on Human Needs wrote that these 
various requirements would ensure that employees have the information 
they need to effectively use paid sick leave, and the Seattle Office of 
Labor Standards noted in particular that if workers cannot access 
information about their leave balances, they are less likely to use the 
benefit even when they are ill. The Chamber/IFA, the American Council 
of Engineering Companies (ACEC), NDIA, NECA, SBLC, Seyfarth Shaw, and 
the ERISA Industry Committee all asserted, however, that weekly 
notifications were too frequent and that responding to employee 
requests for accrual amounts would generate burdensome work and 
paperwork. Commenters offered varied alternative suggestions: IEC asked 
that the Department give contractors full discretion over when to 
inform employees how much paid sick leave they have accrued; EEAC and 
Vigilant requested that notifications be required quarterly; PSC 
believed notification in the ordinary course of payroll administration 
should be sufficient; and NDIA and Delta indicated that notification 
each pay period or at least twice a month would be preferable.
    The Department has modified proposed Sec.  13.5(a)(2) in light of 
these comments. Specifically, under the regulatory text as adopted, 
contractors will be required to inform each employee, in writing, of 
the amount of paid sick leave the employee has accrued but not used no 
less than once per pay period or per month, whichever interval is 
shorter, as well as upon a separation from employment and upon 
reinstatement of paid sick leave pursuant to paragraph (b)(4) of this 
section. The Department believes this revised provision appropriately 
balances the need to ensure that employees are informed about the paid 
sick leave they have available for use with the interests of 
contractors in administering paid sick leave in a manner that is not 
unnecessarily burdensome. As was true of a corresponding change to 
Sec.  13.5(a)(ii), this provision has no effect on a contractor's 
obligation under the SCA to have at least semimonthly pay periods, see 
29 CFR 4.6(h), or under the DBA to have weekly pay periods, see 40 
U.S.C. 3142(c)(1), 29 CFR 5.5(a)(3). The Department also notes that 
contractors are free to provide notifications to employees more 
frequently than is required, including in response to employee 
requests.
    PSC, EEAC and Roffman Horvitz, PLC asked in their comments that the 
Department allow contractors to satisfy the requirements of Sec.  
13.5(a)(2) with a self-service portal employees can access to check 
their paid sick leave accrual, as long as the contractor keeps the 
information updated. The Department intended its proposal to be 
understood to accommodate such a system. Indeed, in the discussion of 
proposed Sec.  13.5(a)(2) in the NPRM, the Department noted that a 
contractor's existing procedure for informing employees of their 
available paid time off, such as notification accompanying each 
paycheck or an online system an employee can check at any time, could 
be used to satisfy or partially satisfy these accrual notification 
requirements provided it is written and clearly indicates the amount of 
paid sick leave an employee has accrued separately from indicating 
amounts of other types of paid time off available (except where the 
employer's paid time off policy satisfies the requirements of Sec.  
13.5(f)(5), described below). If the contractor customarily corresponds 
with or makes information available to its employees by electronic 
means, ``written'' for this purpose includes electronic transmissions. 
The Department has inserted language to this effect into the

[[Page 67628]]

regulatory text to eliminate any confusion.
    Finally, Vigilant commented with respect to proposed Sec.  
13.5(a)(2) that verbal notifications of an employee's amount of accrued 
paid sick leave should be sufficient. The Department believes written 
notifications are more useful for employees and not particularly 
burdensome for contractors, particularly because the requirement is 
modified to coincide with pay periods, when contractors will already be 
providing information to employees, and because the requirement may be 
satisfied by electronic communication, such as by email or an 
appropriate self-service portal. Accordingly, it has not modified this 
provision as requested.
    Proposed Sec.  13.5(a)(3) permitted a contractor to choose to 
provide an employee with at least 56 hours of paid sick leave at the 
beginning of each accrual year rather than allowing the employee to 
accrue such leave based on hours worked over time. As proposed, it 
further provided that in such circumstances, the contractor need not 
comply with the accrual requirements described in Sec.  13.5(a)(1). The 
proposed section required the contractor to allow carryover of paid 
sick leave as required by Sec.  13.5(b)(2), and although the contractor 
could limit the amount of paid sick leave an employee may carry over to 
no less than 56 hours, the contractor could not limit the amount of 
paid sick leave an employee has available for use at any point as is 
otherwise permitted by Sec.  13.5(b)(3). The NPRM provided an example 
to illustrate the operation of these principles: if a contractor 
exercises this option and an employee carries over 16 hours of paid 
sick leave from one accrual year to the next (as described in the 
discussion of Sec.  13.5(b)(2) below), the contractor must permit the 
employee to have 72 hours (16 hours plus 56 hours) of paid sick leave 
available for use as of the beginning of the second accrual year 
(because the contractor is not permitted to limit an employee's paid 
sick leave at any point in time as described in the discussion of Sec.  
13.5(b)(3) below).
    Under Sec.  13.5(c)(4), described below, the contractor may not 
limit the employee's use of that paid sick leave in the second (or any) 
accrual year, but the employee's use can effectively be limited if the 
contractor sets, as permitted by this proposed provision, a limit on 
the amount of paid sick leave an employee can carry over from year to 
year; in the example, if the employee who had 72 hours of paid sick 
leave at the beginning of accrual year 2 did not use any leave in that 
year, she could be permitted to carry over only 56 hours into accrual 
year 3. The Department explained in the NPRM that it believed this 
option would be beneficial to contractors that find the tracking of 
hours worked and/or calculations of paid sick leave accrual to be 
burdensome and would provide employees with the full amount of paid 
sick leave contemplated by the Executive Order at the beginning of each 
accrual year.
    EEAC, the SBLC, Seyfarth Shaw, the HR Policy Association, the 
American Benefits Council, the ERISA Industry Committee, SHRM/CUPA-HR, 
and the Chamber/IFA all generally supported proposed Sec.  13.5(a)(3) 
because they agree it is an advantage for contractors to be excused 
from tracking paid sick leave accrual, but these commenters strongly 
objected to the requirement under the proposed provision to carry over 
paid sick leave that was not used in one accrual year into the next. 
The commenters asserted that employees would unfairly benefit from 
having more than 56 hours of paid sick leave available at once and that 
under State and local paid sick time laws, the option to ``frontload'' 
leave benefits employees because they do not have to wait to accrue 
paid sick time before being able to use it and, in turn, benefits 
employers because they do not have to permit carryover. The NYC 
Department of Consumer Affairs and AFL-CIO also supported the proposed 
provision, noting that it was helpful, especially for small employers, 
to have the flexibility it creates, and did not suggest that it be 
modified.
    After carefully considering these comments, the Department is not 
modifying the proposed provision as requested (although some of the 
proposed text has become Sec.  13.5(a)(3)(i) because of other additions 
to the provision that constitute new subparagraphs (ii) and (iii), 
described below). First and most significantly, the Executive Order 
itself requires that paid sick leave carry over from one year to the 
next. 80 FR 54697. Second, the Department believes that this option, as 
designed, benefits contractors by permitting them to avoid the 
obligation to track paid sick leave accrual, which requires accounting 
for an employee's hours worked and performing calculations each pay 
period, and it would not be appropriate to also allow contractors who 
elect to use this option to reduce the total amount of paid sick leave 
an employee could accrue and use. Specifically, if a contractor does 
not exercise this option and as in the example described above, an 
employee carries over 16 hours of paid sick leave from one accrual year 
to the next, if the employee uses those 16 hours, he must be permitted 
to accrue 56 more, meaning he could (if he has reason to use the paid 
sick leave and enough hours worked to accrue the maximum number of paid 
sick leave hours the contractor permits) have 72 total hours of paid 
sick leave available for use over the course of accrual year 2--just as 
the employee in the example above has 72 hours (that she also might or 
might not have reason to use during the year).
    Commenters also asked for specific additions to the proposed 
provision. EEAC noted that the NPRM did not address circumstances in 
which an employee starts work for a contractor who has chosen this 
option in the middle of an accrual year and suggested the Department 
provide that the employee should begin with as much paid sick leave as 
she would have been able to accrue based on her typical, predicted 
hours worked in the remainder of the year. The Department appreciates 
that these circumstances could arise and that it will not always be 
appropriate to provide a new employee with 56 hours of paid sick leave. 
Accordingly, it is adding as Sec.  13.5(a)(3)(ii) regulatory text 
providing that if a contractor chooses to use the option described in 
Sec.  13.5(a)(3) and the contractor hires an employee or newly assigns 
the employee to work on or in connection with a covered contract after 
the beginning of the accrual year, the contractor may provide the 
employee with a prorated amount of paid sick leave based on the number 
of pay periods remaining in the accrual year. Under this new provision, 
if, for instance, an employee was hired by a contractor to work full-
time on a covered contract after one-third of the pay periods in the 
current accrual year had passed, that employee would be entitled to 
begin her employment with at least 37 hours (two-thirds of 56 hours, 
rounded to the nearest hour) of paid sick leave. The Department notes 
that if a contractor chooses an accrual year that begins on the date an 
employee begins work on or in connection with a covered contract, this 
issue will not arise and this new provision will not be relevant.
    Vigilant asked that contractors be permitted to select this option 
as to only some employees, such as if they wish to track accrual for 
newly hired workers and switch to providing 56 hours of paid sick leave 
at the beginning of an employee's second year of employment. The 
Department agrees that contractors should have flexibility in deciding 
when and as to whom they choose this option. It may be, for example, 
that as to some employees, tracking accrual is simple, whereas for 
others it is more

[[Page 67629]]

complicated, and a contractor wishes to treat those employees 
differently for that reason. Or a contractor might change timekeeping 
systems during the course of a covered contract and determine that one 
option has become preferable to another in later accrual years. 
Therefore, the Department has added Sec.  13.5(a)(3)(iii), which 
provides that a contractor may use the option described in Sec.  
13.5(a)(3) as to any or all of its employees in any or all accrual 
years. This language is not intended to permit a contractor to change 
its accrual systems during an accrual year, but rather, at the 
beginning of a new accrual year. As with all actions a contractor takes 
with respect to paid sick leave, a contractor may not use the decision 
of whether to elect this option to avoid its obligations under the 
Executive Order.
    Finally, the SBLC made two suggestions: first, that contractors be 
permitted to prorate the amount of leave employees who work less than 
full-time on or in connection with covered contracts receive at the 
beginning of an accrual year under this option, and second, that 
contractors be permitted to provide employees with paid sick leave each 
quarter, rather than each year, without tracking accrual, noting that 
under such a system, ``rollover'' of paid sick leave between quarters 
would be appropriate. The Department has considered these suggestions 
but has decided not to adopt either of them. Prorating the amount of 
leave provided under this option could be administratively complicated 
(it would require, for example, knowing in advance how much time an 
employee will work on or in connection with a covered contract over the 
course of a full year) and is unnecessary because, as explained above, 
employers now explicitly have the option of tracking accrual based on 
hours worked on or in connection with covered contracts for part-time 
employees even if they use the Sec.  13.5(a)(3) option for full-time 
employees. Regarding a quarterly accrual system, the Department notes 
that most commenters responded positively to the proposed option to 
provide an alternative to tracking accrual, and adding another method 
of calculating accrual would introduce unnecessary confusion for both 
contractors and for purposes of enforcement by the Wage and Hour 
Division.
    Proposed Sec.  13.5(b) implemented the Executive Order's 
provisions, in sections 2(b), (d), and (j), regarding maximum accrual, 
carryover, and reinstatement of paid sick leave as well as non-payment 
for unused paid sick leave.
    Proposed Sec.  13.5(b)(1) allowed a contractor to limit the amount 
of paid sick leave an employee is permitted to accrue at not less than 
56 hours in each accrual year. The Department received no comments on 
this portion of the provision, which implements section 2(b) of the 
Executive Order, and adopts it as proposed.
    Proposed Sec.  13.5(b)(1) also provided detail regarding an accrual 
year, a term defined in Sec.  13.2. The Department proposed to explain 
that an accrual year is a 12-month period beginning on the date an 
employee's work on or in connection with a covered contract began or 
any other fixed date chosen by the contractor, such as the date a 
covered contract began, the date the contractor's fiscal year begins, a 
date relevant under State law, or the date a contractor uses for 
determining employees' leave entitlements under the FMLA pursuant to 29 
CFR 825.200. Under the proposal, a contractor could choose its accrual 
year but was required to use a consistent option for all employees and 
could not select or change its accrual year in order to avoid the paid 
sick leave requirements of Executive Order 13706 and part 13. The NPRM 
explained that as under the FMLA, if a contractor does not select an 
accrual year, the option that provides the most beneficial outcome to 
the employee would be used. See 29 CFR 825.200(e).
    EEAC commented that contractors should be permitted to choose 
different accrual years for groups of similarly situated employees, 
offering as examples employees who are covered by a CBA, those who are 
employed by the contractor as the result of a merger with or 
acquisition of a different company, or those as to whom different paid 
time off policies apply. Because the Department agrees that there could 
be circumstances in which it would be difficult for a contractor to 
select the same accrual year for all employees, such as if a large 
contractor employs some workers subject to a CBA that calls for the 
accrual year to begin on one date and others subject to a relevant 
State law that calls for a different date, it has modified the 
regulatory text to incorporate EEAC's suggestion. The Department notes, 
however, that the contractor must choose the same accrual year (or, if 
the contractor chooses an accrual year that begins on the date an 
employee begins work on or in connection with a covered contract, the 
same accrual year methodology) for similarly situated employees and, as 
noted at the proposal stage, may not select or change any employee's 
accrual year in order to avoid the paid sick leave requirements of the 
Order and part 13.
    Proposed Sec.  13.5(b)(2) provided that paid sick leave shall carry 
over from one accrual year to the next. The proposed language would 
mean that upon the date a contractor has selected as the beginning of 
the accrual year, an employee would continue to have available for use 
as much paid sick leave as the employee had accrued but not used as of 
the end of the previous accrual year. This portion of Sec.  13.5(b)(2) 
implements section 2(d) of the Executive Order, and no commenter 
opposed it, so the Department adopts it as proposed.
    Proposed Sec.  13.5(b)(2) further provided that paid sick leave 
carried over from the previous accrual year would not count toward any 
limit the contractor sets on the annual accrual of paid sick leave. The 
NPRM explained that under this proposal, if an employee carries over 30 
unused hours of paid sick leave from accrual year 1 to accrual year 2, 
for example, she must still be permitted to accrue up to 56 additional 
hours of paid sick leave in accrual year 2 rather than only 26 (because 
30 plus 26 is 56), subject to the limitations described below. NAM 
opposed this portion of the proposed provision, asserting that it 
allows employees to accrue more than 56 hours in a year. The Department 
believes that the Executive Order's requirement that a contractor allow 
an employee to accrue up to 56 hours annually only has meaningful 
effect if an employee can accrue up to 56 hours of new paid sick leave 
in each accrual year rather than merely carry over unused paid sick 
leave from the previous accrual year. The Department notes that an 
employee's ability to accrue additional paid sick leave if she has 
carried over unused leave from the previous year is limited by Sec.  
13.5(b)(3) (which, as described below, allows a contractor to limit the 
amount of paid sick leave an employee has at any point in time) and 
that an employee's ability to use paid sick leave, regardless of the 
amount she has accrued, is limited by the set of reasons that justify 
such use listed in Sec.  13.5(c)(1) (which, as described below, sets 
forth the purposes for which an employee may use paid sick leave). As 
an example, as noted by EEAC, if an employee accrues 56 hours of paid 
sick leave in accrual year 1 and uses no paid sick leave in year 1 or 
year 2, she could begin accrual year 3 with only 56 hours of leave, 
having accrued none in accrual year 2 (pursuant to Sec.  13.5(b)(3)); 
in other words, the effect of this provision on an employee's ability 
to accrue paid sick leave is limited.

[[Page 67630]]

Accordingly, this provision is adopted as proposed.
    Proposed Sec.  13.5(b)(3) allowed a contractor to limit the amount 
of paid sick leave an employee is permitted to have available for use 
at any point to not less than 56 hours and further explained that even 
if an employee has accrued fewer than 56 hours of paid sick leave since 
the beginning of the accrual year, the employee need only be permitted 
to accrue additional paid sick leave if the employee has fewer than 56 
hours available for use. The NPRM provided as an example a circumstance 
in which an employee carries over 56 hours of paid sick leave into a 
new accrual year; in that case, a contractor need not permit that 
employee to accrue any additional paid sick leave until she has used 
some portion of that leave. If and when she does use paid sick leave, 
she must be permitted to accrue additional paid sick leave, up to a 
limit of no less than 56 hours for the accrual year, beginning with 
hours worked in the pay period after she has used paid sick leave such 
that her amount of available leave is less than 56 hours. Similarly, as 
explained in the NPRM, if an employee carries over 16 hours of paid 
sick leave into a new accrual year, she must be permitted to accrue 40 
additional hours of paid sick leave even if she does not use any paid 
sick leave while that accrual occurs. Once she has 56 hours of paid 
sick leave accrued, the contractor may prohibit her from accruing any 
additional leave unless, and until the pay period after, she uses some 
portion of the 56 hours. If she uses, for example, 24 hours of paid 
sick leave in the same accrual year (such that she has 32 hours 
remaining available for use), she must be permitted to accrue up to at 
least 16 more hours (in addition to the 40 hours she has already 
accrued during the accrual year) for a total of 56 hours accrued in 
that accrual year. If she did so, she would then have 48 hours of paid 
sick leave (32 previously available hours plus 16 newly accrued hours) 
available for use and could be limited to that amount until the next 
accrual year.
    Numerous commenters, including Caring Across Generations, the 
American Association of University Women, the National Association of 
County and City Health Officials, and the National Hispanic Council on 
Aging, asked the Department to simplify the accrual system by limiting 
the amount of paid sick leave an employee can carry over from one 
accrual year to the next rather than the amount of paid sick leave an 
employee has available at any point in time. And Seyfarth Shaw noted 
that the Department's proposed system will be confusing for contractors 
because limiting the amount of paid sick leave an employee may have 
available for use deviates from the way many State and local paid sick 
time laws operate. Although the Department appreciates the commenters' 
interest in having paid sick leave accrual operate in the simplest 
manner possible, the Department declines to adopt this suggestion 
because it believes its proposed system to be faithful to the Executive 
Order, which provides in section 2(b) that ``[a] contractor may not set 
a limit on the total accrual of paid sick leave per year, or at any 
point in time, at less than 56 hours.'' 80 FR 54697 (emphasis added). 
Accordingly, the Department adopts Sec.  13.5(b)(3) as proposed. The 
Department notes, however, that consistent with the permissive language 
of Sec.  13.5(b)(3), contractors would be in compliance with the Order 
and part 13 if they permitted employees to have available for use an 
amount of paid sick leave greater than 56 hours and if they allowed 
employees with more than 56 hours of paid sick leave available for use 
to carry over only 56 of those hours into the next year; in other 
words, a contractor may choose to use the simplified system the 
commenters prefer, based on ease of administration, compliance with a 
State or local paid sick time law, or for any other reason.
    Proposed Sec.  13.5(b)(4) implemented the second clause of section 
2(d) of the Executive Order by requiring that paid sick leave be 
reinstated for employees rehired by the same contractor or a successor 
contractor within 12 months after a job separation. The proposed text 
specified that this reinstatement requirement applied whether the 
employee leaves and returns to a job on or in connection with a single 
covered contract or works for a single contractor on or in connection 
with more than one covered contract, regardless of whether the employee 
remains employed by the contractor to work on non-covered contracts in 
between periods of working on covered contracts. The NPRM offered as an 
example a situation in which a service employee on an SCA-covered 
contract accrued but did not use 12 hours of paid sick leave, moved to 
a different work site to perform work unrelated to a contract with the 
Federal Government (either with or not with the same employer), and 
after 6 months, returned to the original SCA-covered contract. In this 
example, the employee would begin back on the original job with 12 
hours of paid sick leave available for use. Pursuant to Sec. Sec.  
13.5(a)(2) and 13.5(b)(1), if her first week back on the job is within 
the same accrual year during which she accrued those 12 hours, the 
contractor would be required to count any fraction of 30 hours worked 
in her previous time on the contract toward the accrual of her next 
hour of paid sick leave, but the contractor may limit her additional 
accrual in that accrual year to 44 hours such that she can only accrue 
56 hours total in the accrual year.
    Proposed Sec.  13.5(b)(4) further explained that the reinstatement 
requirement also applied if an employee takes a job on or in connection 
with a covered successor contract after working for a different 
contractor on or in connection with the predecessor contract, including 
when an employee is entitled to a right of first refusal of employment 
from a successor contractor under Executive Order 13495. (The terms 
``successor contract'' and ``predecessor contract'' were defined in 
proposed Sec.  13.2, and the requirements that a predecessor contractor 
submit to a contracting agency, and a contracting agency provide to a 
successor contractor, a certified list of relevant employees' accrued, 
unused paid sick leave appeared in proposed Sec. Sec.  13.26 and 
13.11(f), respectively.) The NPRM offered the example of an employee 
performing work on a contract to sell food to the public in a National 
Park who has accrued 16 hours of paid sick leave. If that contract 
ends, a different contractor takes over the food stand, and the 
employee is rehired by the successor contractor, he would begin his new 
job with 16 hours of paid sick leave. In the NPRM, the Department 
invited comments on its interpretation of section 2(d) of the Executive 
Order to mean that the reinstatement requirement applied if an employee 
is rehired by a different contractor on or in connection with a covered 
successor contract after working on or in connection with the 
predecessor contract. The Department described its belief that the 
Executive Order's requirement to carry over previously accrued paid 
sick leave for employees ``rehired by a covered contractor'' should be 
interpreted to include different successor contractors who rehire 
employees from the predecessor contract. It further noted that SCA-
covered successor contractors are generally required by the 
Nondisplacement Executive Order to provide a right of first refusal of 
employment to employees on the predecessor contract in positions for 
which they are qualified, and as a result, many covered successor 
contractors effectively ``rehire'' these employees,

[[Page 67631]]

making it reasonable to interpret Executive Order 13706 to provide that 
such employees' accrued paid sick leave balances would carry over as 
well. The NPRM also explained that this interpretation would ensure 
that the carryover of accrued, unused leave would not depend on whether 
the successor contract is awarded to the same contractor that performed 
on the predecessor contract (in which case the Executive Order clearly 
mandates that employees either keep their accrued, unused paid sick 
leave or have it reinstated).
    The Department's proposal recognized that the Government must 
ensure that it spends money wisely and it is imperative that contract 
actions result in the best value for the taxpayer. It further noted 
that the Government understands contractors may include the costs of 
benefits in overhead and it therefore may not (except in cost-type 
contracts) pay contractors based on their actual costs. For these 
reasons, the Department invited comments regarding the extent to which 
its interpretation of the reinstatement requirement could affect 
pricing and cost accounting, if at all, for covered contractors and 
contracting agencies, including any potential for paying twice for the 
same benefit--once to a predecessor contractor charging the Government 
for predicted use of paid sick leave during its contract term, and a 
second time to a successor contractor who would be obligated to pay for 
unused sick leave later used by its employees during the successor's 
contract, with the Government potentially bearing the added costs 
through higher contract prices.
    The Department's proposal noted a potential scenario in which a 
contractor on a covered contract may have included in its bid the full 
cost of providing 56 hours of paid sick leave to every employee 
performing work on or in connection with the contract, and the 
contracting agency may treat the full amount of such leave as an 
allowable cost. At the end of the contract term, some employees will 
likely have balances of accrued but unused paid sick leave which could 
be carried over to a successor contractor. The Department specifically 
sought comment on how the current contractor and any different 
contractors bidding for the successor contract would account for this 
situation in their bid pricing. Finally, the Department invited comment 
as to the extent to which any potential impacts on pricing or cost 
accounting might be mitigated, including ways to mitigate any potential 
impact on subcontractors, small businesses, and prime contractors with 
covered supply chains. In providing comments on the feasibility of 
mitigation steps, the Department asked commenters to consider that the 
requirement for paid sick leave flows down to all subcontract tiers and 
that in other than cost-type contracts, the Government may not have 
insight into and does not pay contractors based on their actual costs.
    CLASP, Demos, the Working Families Organization, NETWORK, the 
Diverse Elders Coalition, CAP Women's Initiative, Caring Across 
Generations, CPD, NELP, and Equal Rights Advocates supported the 
proposed provision, writing that reinstatement of leave by successor 
contractors could encourage employees to continue working on successor 
contracts, which would improve efficiency and reduce training costs for 
the contractor. Other commenters supported the proposal for additional 
reasons: The AFL-CIO noted that an employee's access to paid sick leave 
should not depend on which contractor wins the contract on which she 
works; the SEIU wrote that the retention of benefits is valuable to 
employees and therefore will promote continuity on covered contracts; 
the American Federation of State, County & Municipal Employees (AFSCME) 
wrote that any costs of reinstating leave could be included in 
contractors' bids, and the Building Trades asserted that the proposal 
advances the goals of the Executive Order. Other commenters, however, 
opposed the proposed provision: The PSC and the NAM argued that 
potential successor contractors would not know the costs of the paid 
sick leave they would have to reinstate at the time of bidding (further 
suggesting that if such reinstatement is required, a successor 
contractor should be entitled to a price adjustment after receiving the 
certified list of employees' paid sick leave accrual created by the 
predecessor contractor); the NAM also asserted that implementing this 
requirement would be confusing and contracting agencies would be 
charged twice for the same paid sick leave; and DLA Piper and the HR 
Policy Association believed it would be challenging to create a 
certified list of employees' paid sick leave accruals where tracking 
employees' time is difficult, that it was unclear what a successor 
contractor should do if it did not receive a certified list, and that 
there would be unfairness to successor contractors where an employee 
does so little covered work for the successor contractor that she would 
not have been able to accrue paid sick leave on the successor contract.
    After careful consideration of these comments, the Department is 
promulgating the Final Rule without requiring that successor 
contractors reinstate paid sick leave to employees who worked on the 
predecessor contract. Although the Department appreciates the points 
made by the commenters who supported the provision and had proposed 
including it for those reasons, the Department finds the concerns of 
commenters opposed to the provision compelling. Because at this time, 
the Department has not identified a logistically viable mechanism to 
address the concerns expressed about costs, including to the 
government, the Department has removed the proposed provision. As noted 
elsewhere, other definitions and requirements included in the proposed 
rule to implement reinstatement by successor contractors--in 
particular, the requirements to create and provide a certified list of 
employees and their paid sick leave balances, as well as a 
recordkeeping requirement related to that list--also do not appear in 
this Final Rule.
    Proposed Sec.  13.5(b)(5) implemented section 2(j) of the Executive 
Order by providing that nothing in the Order or part 13 required a 
contractor to make a financial payment to an employee for accrued paid 
sick leave that has not been used upon a separation from employment. 
Although the Executive Order does not prohibit a contractor from making 
such payments should the contractor so choose, under the proposed 
regulatory text, doing so (whether voluntarily or pursuant to a CBA) 
would not affect that contractor's obligation to reinstate any accrued 
paid sick leave upon rehiring the employee within 12 months of the 
separation pursuant to Sec.  13.5(b)(4). In other words, under proposed 
Sec.  13.5(b)(5), a contractor could not avoid the requirement to 
reinstate paid sick leave when it rehires an employee by cashing out 
the leave at the time of the original separation from employment. The 
proposed interpretation was consistent with the Department's 
understanding that the Executive Order is meant to ensure that 
employees of Federal contractors have access to paid sick leave rather 
than its cash equivalent. The Department requested comments, however, 
regarding the impact of the proposed provision on contractors and 
employees, as well as the incidence of cash-out for paid time off or 
paid sick time under contractors' current policies or relevant CBAs.

[[Page 67632]]

    StrategicHealthSolutions, LLC, NECA, the SBLC, the American 
Benefits Council, Vigilant, the Chamber/IFA, and NAM all commented that 
if a contractor pays an employee for accrued, unused paid sick leave, 
that contractor should no longer have the obligation to reinstate such 
leave if the employee returns to employment on a covered contract. 
EEAC, PSC, and Delta wrote more specifically that contractors subject 
to State or local laws requiring payment to employees for unused paid 
sick time should not have to reinstate such leave; and EEAC and DLA 
Piper suggested that contractors party to a CBA that requires payment 
to employees for unused leave should not have to reinstate such leave. 
The Building Trades, AFL-CIO, and A Better Balance similarly asked that 
employees be able to receive the cash value of unused paid sick leave 
upon separation from employment rather than have leave reinstated, 
although they suggested that the employee, rather than contractor, 
decide whether to exercise that option.
    In light of these comments, the Department is modifying the 
regulatory text to provide that if a contractor makes a financial 
payment to an employee for accrued paid sick leave that has not been 
used upon a separation from employment, that contractor is no longer 
obligated to comply with the reinstatement of paid sick leave 
requirement in Sec.  13.5(b)(4). This relief from the reinstatement 
obligation also applies regardless of the contractor's reason for 
making the payment--that is, whether it is required by State or local 
law, mandated by a CBA, or a voluntary decision. It applies only if the 
payment is in an amount equal to or greater than the value of the pay 
and benefits the employee would have received pursuant to Sec.  
13.5(c)(3) had the employee used the paid sick leave. Pursuant to the 
Executive Order itself, the Department is not changing the portion of 
the provision that notes a contractor is not required by the Order or 
part 13 to make such a payment. The Department is neither requiring 
contractors to allow employees to choose whether to accept payment for 
unused paid sick leave nor prohibiting contractors from giving 
employees such a choice.
    Proposed Sec.  13.5(c) described the purposes for which an employee 
may use paid sick leave, thereby implementing section 2(c) of the 
Executive Order, and addressed the calculation of the use of paid sick 
leave.
    Proposed Sec.  13.5(c)(1) required, subject to the conditions 
described in Sec.  13.5(d) and (e) and the amount of paid sick leave 
the employee has available for use, a contractor to permit an employee 
to use paid sick leave to be absent from work for that contractor on or 
in connection with a covered contract for four reasons. The Department 
received only positive comments regarding the four proposed provisions 
describing the reasons for leave--in particular, CLASP, Caring Across 
Generations, Demos, the Working Families Organization, NELP, the CAP 
Women's Initiative, Jobs With Justice, Young Invincibles, Lift 
Louisiana, the National Hispanic Council on Aging, the National Council 
of Jewish Women, and the Coalition on Human Needs, among others, 
supported the enumerated uses of paid sick leave--and it adopts that 
list as proposed.
    First, Sec.  13.5(c)(1)(i) permits an employee to use paid sick 
leave if she is absent because of her own physical or mental illness, 
injury, or medical condition. As noted in the NPRM and discussed above, 
these terms, defined in Sec.  13.2, are meant to be understood broadly.
    Second, Sec.  13.5(c)(1)(ii) permits an employee to use paid sick 
leave if she is absent because she is obtaining diagnosis, care, or 
preventive care from a health care provider. The Department also 
interprets the terms obtaining diagnosis, care, or preventive care from 
a health care provider and health care provider, defined in Sec.  13.2 
and discussed above, broadly.
    Third, Sec.  13.5(c)(1)(iii) permits an employee to use paid sick 
leave if she is absent because she is caring for her child, parent, 
spouse, domestic partner, or any other individual related by blood or 
affinity whose close association with the employee is the equivalent of 
a family relationship who has any of the conditions or needs for 
diagnosis, care, or preventive care referred to in Sec.  13.5(c)(1)(i) 
or (ii) or is otherwise in need of care. The terms child, parent, 
spouse, domestic partner, and individual related by blood or affinity 
whose close association with the employee is the equivalent of a family 
relationship are defined in Sec.  13.2. As the Department explained in 
the NPRM, it understands the use of these terms in the Executive Order 
to be an indication that the category of individuals for whom an 
employee can use paid sick leave to care is expansive. As also noted in 
the NPRM, the individual for whom the employee is caring could have any 
of the broadly understood conditions or needs referred to in Sec.  
13.5(c)(1)(i) or (ii). For example, an employee may use paid sick leave 
to be with a child home from school with a cold or to accompany his 
spouse to an appointment at a fertility clinic.
    This provision also refers to an individual who is ``otherwise in 
need of care,'' language that appears in section 2(c) of the Executive 
Order. In the NPRM, the Department interpreted this phrase to refer to 
non-medical caregiving for an individual who has a general need for 
assistance related to the individual's underlying health condition, 
noting as an example that an employee may use paid sick leave to 
provide his grandfather, who has dementia, unpaid assistance with 
bathing, dressing, and eating if the grandfather's usual paid personal 
care attendant is unable to keep her regular schedule. AARP supported 
the Department's inclusion of care for older adults, and the Department 
reiterates its interpretation here.
    Fourth, Sec.  13.5(c)(1)(iv) permits an employee to use paid sick 
leave if the absence is because of domestic violence, sexual assault, 
or stalking, if the time absent from work is for the purposes otherwise 
described in Sec.  13.5(c)(1)(i) or (ii) or to obtain additional 
counseling, seek relocation, seek assistance from a victim services 
organization, take related legal action, including preparation for or 
participation in any related civil or criminal legal proceeding, or 
assist an individual related to the employee as described in Sec.  
13.5(c)(1)(iii) in engaging in any of these activities. The terms used 
in Sec.  13.5(c)(1)(iv) (domestic violence, which includes the terms 
spouse, domestic partner, intimate partner, and family violence; sexual 
assault; stalking; obtain additional counseling, seek relocation, seek 
assistance from a victim services organization, or take related legal 
action; victim services organization; and related legal action or 
related civil or criminal legal proceeding) are defined in Sec.  13.2 
and interpreted broadly in keeping with the purpose of ensuring that 
victims of domestic violence, sexual assault, or stalking are able to 
obtain the care, safety, and legal protections they need without losing 
wages or their jobs and that employees can assist such victims who are 
family members or like family in doing so.
    For example, as noted in the NPRM, an employee who is a victim of 
domestic violence could use a day of paid sick leave to prepare for a 
meeting with an attorney, travel to the attorney's office, have the 
meeting to discuss her legal options, and travel home; a victim could 
use a day of paid sick leave to go to a courthouse to determine the 
process for filing a petition for a civil protection order, complete 
any necessary paperwork, and file that paperwork with the court and use 
another full day to

[[Page 67633]]

attend proceedings at the court in support of that application, 
including mandatory mediation. For this purpose, assisting another 
individual who is a victim of domestic violence, sexual assault, or 
stalking includes, but is not limited to, accompanying the victim to 
see a health care provider, attorney, social worker, victim advocate, 
or other individual who provides services the victim needs as a result 
of the domestic violence, sexual assault, or stalking. If the 
individual the employee is assisting is a minor victim of domestic 
violence or child sexual abuse, the employee could use paid sick leave 
to, for example, seek legal protections for the victim (including 
filing a police report and/or seeking a civil protection order), 
medical treatment for the victim, or emergency relocation services.
    As the Department explained in the discussion of proposed Sec.  
13.5(c)(1) in the NPRM, use of paid sick leave is contractor, rather 
than contract, specific, meaning that an employee who has accrued paid 
sick leave working on or in connection with one covered contract could 
use the leave for time she would otherwise have been working on or in 
connection with another covered contract for the same contractor. For 
example, if an employee had accrued 4 hours of paid sick leave over the 
course of several pay periods during which he worked for a single 
contractor in connection with one covered contract for 60 hours and 
another two covered contracts for 30 hours each, he could use his 
accrued paid sick leave during time he was scheduled to perform work in 
connection with any of the three contracts, or any other covered 
contract, on behalf of the same contractor. This explanation applies to 
the provision as adopted.
    The Department also noted in the NPRM that under proposed Sec.  
13.5(c)(1), an employee need only be permitted to use paid sick leave 
during time the employee would otherwise have spent working on or in 
connection with a covered contract rather than time spent performing 
other work (such as on a private contract), even if that work is for 
the same contractor. Numerous commenters, including the National 
Partnership, A Better Balance, CPD, and the National Council of Jewish 
Women, Greater New Orleans Section, asked that the Department amend 
this portion of the provision to require contractors to allow employees 
to use paid sick leave at any time, regardless of whether they would 
otherwise have been performing work on or in connection with a covered 
contract, asserting the Department's proposed system would be difficult 
to administer. Although the Department is sympathetic to the 
commenters' concerns, it does not believe it is appropriate given the 
limits of the Executive Order's scope to require that contractors 
permit employees to use paid sick leave at times they would not be 
performing work on or in connection with a covered contract. The 
Department notes, however, that as explained in the discussion of the 
anti-interference provision in Sec.  13.6(a) below, a contractor is 
prohibited from scheduling an employee's covered and non-covered work 
for the purpose of preventing an employee from using paid sick leave.
    Relatedly, the Hawaii Employers Council posed a question regarding 
the implications of an employee's using paid sick leave on a day when 
he would have worked for half the day on a covered contract and half 
the day on a non-covered contract. The Department clarifies that the 
contractor would be obligated, provided all other relevant requirements 
are met, to allow the employee to use paid sick leave for the portion 
of the day during which she would have been working on the covered 
contract. In the absence of another requirement (such as one imposed by 
a CBA, a State or local paid sick time law, or the FMLA) and if the 
employer has records or other proof adequately segregating the time the 
employee is performing the non-covered work, it is at the employer's 
discretion how to address the employee's need for leave during the 
remainder of the day.
    The Department has modified the text of Sec.  13.5(c)(1) to provide 
that a contractor must permit an employee to use paid sick leave to be 
absent from work for that contractor during time the employee would 
have been performing work on or in connection with a covered contract 
or, if the contractor estimates the employee's hours worked in 
connection with such contracts for purposes of accrual, during any work 
time. Two aspects of this language are notable. First, as in the 
proposed text, this language does not prohibit an employer from 
permitting employees to use paid sick leave during time they would have 
been performing non-covered work, an approach that AGC and Roffman 
Horvitz suggest may be particularly suitable for covered construction 
contractors whose workforces may move regularly between covered and 
non-covered work. A contractor may choose to do so, and the Department 
clarifies, in response to ABC's comment, that a contractor would not be 
penalized for doing so; specifically, if a contractor has a more 
generous policy regarding when employees may use paid sick leave than 
is necessary under the Order and part 13 such that, for example, an 
employee could use all 56 hours of his accrued paid sick leave during a 
period when he was working exclusively on a private contract, the 
contractor is not obligated to provide any additional paid sick leave 
for use during time the employee spends performing work on or in 
connection with covered contracts.
    Second, the revised language provides that if a contractor chooses 
to estimate rather than track the amount of time an employee spends 
performing work in connection with covered contracts as permitted by 
Sec.  13.5(a)(1)(i) or (iii), that contractor must permit the employee 
to use her paid sick leave at any time she would have been working for 
the contractor. As explained in the NPRM, if a contractor wishes to 
distinguish an employee's covered and non-covered time for purposes of 
(accrual and) use of paid sick leave, it is the contractor's 
responsibility to keep adequate records distinguishing between an 
employee's covered and non-covered work, and any denial of a request to 
use paid sick leave because the leave would occur while an employee is 
performing work that is not covered by Executive Order 13706 or part 13 
must be supported by records or other proof demonstrating that fact. 
The implication of choosing to calculate an employee's paid sick leave 
based on an estimate rather than track actual covered and non-covered 
hours worked is that the contractor does not have proof of the actual 
time the employee spends performing covered work, and therefore it 
would not be possible for the contractor to properly restrict the 
employee's use of paid sick leave to that time.
    Finally, the Department notes that as explained in the NPRM, if an 
employee falls within the 20 percent of hours worked exclusion created 
by Sec.  13.4(e) for some workweeks but not others, the employee must 
be permitted to use paid sick leave at any time the employee would have 
been working on or in connection with covered contracts (or, if the 
contractor estimates the employee's hours worked in connection with 
such contracts for purposes of accrual, during any work time), 
regardless of whether that time falls during a workweek in which the 
exclusion applies with respect to accrual. As explained in the proposed 
rule, this approach was designed to avoid complications that would 
otherwise arise in responding to requests to use paid sick leave 
accrued by such employees. Specifically, an employee could request to 
use paid sick leave during a week in which it was not clear at the time 
of the request (because it would not be known until the end of

[[Page 67634]]

the week) whether the employee met the 20 percent threshold; under this 
approach, in such circumstances, the contractor must permit the use of 
paid sick leave (assuming all relevant requirements for use are met) 
rather than deny the request or provide an uncertain response to the 
employee.
    Proposed Sec.  13.5(c)(2) required a contractor to account for an 
employee's use of paid sick leave in increments of no greater than 1 
hour. In other words, under the proposal, although a contractor was 
permitted to choose to allow employees to use paid sick leave in 
increments of smaller than 1 hour (such as half an hour or 15 minutes), 
it was not permitted to require employees to use paid sick leave in 
increments of any more than 1 hour. The NPRM explained that, for 
example, if an employee needs to be an hour late for work because he 
accompanied his sister to a chemotherapy appointment that morning, his 
employer must permit him to use 1 hour of paid sick leave (rather than, 
for instance, requiring him to take a full day off or use a full day's 
leave).
    Several commenters asked that the Department amend this provision: 
EEAC asked the Department to make the minimum increment of leave 4 
hours, because scheduling a replacement worker can be difficult if an 
employee misses only a short period of work; the SBLC suggested that 
contractors be permitted to require employees to use a full day of paid 
sick leave if they request to use more than 75 percent of their 
normally scheduled work hours; A4A asked that the minimum increment for 
airline flight crew employees be 1 day; and the American Benefits 
Council noted that it would be expensive for contractors that currently 
track attendance in greater increments to implement this requirement. 
The United Food and Commercial Workers International Union (UFCW), on 
the other hand, asked that the Department require contractors to allow 
employees to use paid sick leave in increments smaller than 1 hour if 
they already keep other time records in fractions of an hour. The 
Department has considered each of these suggestions but declines to 
adopt any of them. A contractor may limit an employee's accrual of paid 
sick leave to 56 hours, or seven 8-hour days, per year. If an employee 
were required to use 4 or 8 hours of that leave at a time even when she 
only needs to be absent from work for a shorter duration, she would 
more rapidly deplete the amount of paid sick leave she has available 
for use than if she were permitted to use only the smaller increments 
she needed. Furthermore, employees will typically accrue paid sick 
leave over time, meaning they will often have far less than 56 hours 
available for use. If, for example, an employee who has 10 hours of 
paid sick leave available for use needs to leave work on a covered 
contract just 1 hour early to take his daughter to a doctor's 
appointment, but he could be required to use 4 hours of paid sick 
leave, he would then have only 6 hours of paid sick leave--less than a 
day--available if the following week his daughter is sick and needs to 
stay home from school. Such outcomes would not advance the purposes of 
the Executive Order because they would make the paid sick leave benefit 
less meaningful for employees and could discourage employees from 
obtaining preventive health care for themselves and their families. The 
Department recognizes, however, that the smaller the minimum increment 
of paid sick leave required, the greater potential exists for 
administrative burden on contractors; it therefore declines to require, 
although it continues to allow, contractors to account for paid sick 
leave in increments smaller than 1 hour.
    Proposed Sec.  13.5(c)(2)(i) explained that a contractor could not 
reduce an employee's accrued paid sick leave by more than the amount of 
leave the employee actually takes, and a contractor could not require 
an employee to take more leave than is necessary to address the 
circumstances that precipitated the need for the leave, provided that 
the leave is counted using an increment of no greater than 1 hour. This 
language was based on FMLA regulations regarding the use of FMLA leave. 
See 29 CFR 825.205(a). The Department explained in the NPRM that this 
provision means that if a contractor chooses to waive its increment of 
leave policy in order to return an employee to work--for example, if an 
employee arrives a half hour late to work because he was at an 
appointment with a psychologist and the contractor waives its normal 1-
hour increment of leave and puts the employee to work immediately--the 
contractor would be required to treat the employee as having used no 
more than the amount of leave the employee actually used, half an hour. 
See 78 FR 8867 (discussing relevant language codified in 29 CFR 
825.205(a)). Under no circumstances could a contractor treat an 
employee as having used paid sick leave for any time that employee was 
working. The Department received no comments regarding Sec.  
13.5(c)(2)(i) and adopts it as proposed, but with minor, non-
substantive edits for consistency with language used in other 
provisions.
    Proposed Sec.  13.5(c)(2)(ii) explained that the amount of paid 
sick leave used could not exceed the hours an employee would have 
worked if the need for leave had not arisen. For example, as explained 
in the NPRM, if an employee is scheduled to work from 9am to 3pm, and 
she is absent from work from 10:30am to 12:30pm to take her father to a 
doctor's appointment, a contractor could deduct no more than 2 hours of 
paid sick leave from her accrued paid sick leave. Similarly, if the 
employee is scheduled to work from 9 a.m. to 3 p.m. and she is absent 
from work for the entire day to care for her sick child, a contractor 
may deduct no more than 6 hours of paid sick leave from her accrued 
paid sick leave. Further, the NPRM noted, if an employee is using paid 
sick leave at a time when she could have worked beyond her scheduled 
hours but would not have been required to do so, the contractor could 
not treat the employee as having used paid sick leave for those 
optional hours. For example, if an employee scheduled to work from 9 
a.m. to 3 p.m. could have chosen to stay until 7 p.m. that night to 
earn overtime, but she was absent for the entire day, a contractor 
could not deduct more than 6 hours of paid sick leave from her accrued 
paid sick leave. The proposed provision was consistent with the FMLA 
regulation at 29 CFR 825.205(c) (``Voluntary overtime hours that an 
employee does not work due to an FMLA-qualifying reason may not be 
counted against the employee's FMLA leave entitlement.''). In response 
to comments from AAR and Delta, the Department clarifies that these 
examples were meant to distinguish voluntary overtime from mandatory 
overtime; if an employee was scheduled to work from 9am to 7pm and was 
absent for the entire day, he would have used (and, pursuant to Sec.  
13.5(c)(3), must receive regular pay and benefits for) 10 hours of paid 
sick leave regardless of whether a portion of that time would have 
constituted overtime. The Department did not receive requests to amend 
Sec.  13.5(c)(2)(ii) and adopts it as proposed.
    In the NPRM, the Department requested comments regarding whether it 
should add a physical impossibility exception, as exists under the FMLA 
regulations at 29 CFR 825.205(a)(2), to the 1-hour minimum increment 
requirement. Under such a provision, in situations in which an employee 
is physically unable to access the worksite after the start of the 
shift or to depart from the workplace prior to the end of the shift, a 
contractor would be permitted to require the employee to continue to 
use paid sick leave for as long as the physical impossibility

[[Page 67635]]

remains. Examples that arise in the FMLA context are flight attendants 
whose scheduled flight departs, train conductors whose scheduled train 
departs, and laboratory technicians who work in ``clean rooms'' that 
must remain sealed. The Department sought comment regarding the 
categories of covered contracts and employees entitled to paid sick 
leave under Executive Order 13706 and part 13 with respect to which 
similar circumstances could arise and the implications of a physical 
impossibility provision for contractors and employees who perform on or 
in connection with those contracts.
    AAR, A4A, Delta, EEAC, and the SBLC asked that the Department 
include a physical impossibility exception to the minimum increment set 
forth in Sec.  13.5(c)(2). Based on these requests, the Department has 
included such a provision, modeled on the language of the analogous 
FMLA provision, as Sec.  13.5(c)(2)(iii). The new language provides 
that if it is physically impossible for an employee using paid sick 
leave to commence or end work mid-way through a shift, such as if a 
flight attendant or a railroad conductor is scheduled to work aboard an 
airplane or train, or a laboratory employee is unable to enter or leave 
a sealed ``clean room'' during a certain period of time, and no 
equivalent position is available, the entire period that the employee 
is forced to be absent constitutes paid sick leave. The period of the 
physical impossibility is limited to the period during which the 
contractor is unable to permit the employee to work prior to the use of 
paid sick leave or return the employee to the same or an equivalent 
position due to the physical impossibility after the use of paid sick 
leave.
    The Department notes that as under the FMLA, this provision is 
``intended to make a limited allowance for the practical realities of 
the airline, railroad, and other industries with unique workplaces in 
which it is physically impossible for employees to leave work early or 
start work late.'' Final Rule, The Family and Medical Leave Act,, 78 FR 
8833, 8869 (Feb. 6, 2013); see also FOH ]39e01(d)(3) (``The `physical 
impossibility' provision is intended to be narrowly construed and 
applied only in instances of true physical impossibility.''). 
Furthermore, as under the FMLA, ``the physical impossibility rule is 
protective of employees who may be subject to disciplinary action 
because they need to take leave beyond that required'' by the reason 
for which they are using paid sick leave. Id. Under this new provision, 
all leave taken due to physical impossibility will count as paid sick 
leave. Finally, the Department notes that ``an equivalent position'' as 
used in Sec.  13.5(c)(2)(i) has the same meaning described in the FMLA 
regulations at 29 CFR 825.215. Therefore, ``[a]n equivalent position is 
one that is virtually identical to the employee's former position in 
terms of pay, benefits and working conditions, including privileges, 
perquisites and status. It must involve the same or substantially 
similar duties and responsibilities, which must entail substantially 
equivalent skill, effort, responsibility, and authority.'' 29 CFR 
825.215(a).
    Proposed Sec.  13.5(c)(3) required a contractor to provide to an 
employee using paid sick leave the same pay and benefits the employee 
would have received had the employee not used paid sick leave. In other 
words, while using paid sick leave, employees paid on a salary basis 
may not face any deduction in pay, and employees paid hourly must 
receive the same hourly rate of pay they would have earned had they 
been present at work. In addition, employees must receive the same 
benefits while using paid sick leave that they would have were they 
present at work; for example, contractors must continue to make 
contributions to any fringe benefit plan (such as a health insurance 
plan or retirement account) for time employees are using paid sick 
leave and count time toward the earning of other benefits (for example, 
the accrual of vacation time), although, as explained above, the time 
an employee is using paid sick leave does not constitute hours worked 
for purposes of paid sick leave accrual. As noted in the NPRM, under 
this provision, employees whose wages are governed by the SCA or DBA 
would receive the same wages required under those statutes, including 
health and welfare and other fringe benefits or the cash equivalent 
thereof, as they would have earned had they been present at work 
instead of using paid sick leave.
    TrueBlue, Inc. posed a question in its comment regarding the proper 
rate of pay when an employee uses paid sick leave at a time when she is 
earning a different hourly amount that she was when she accrued the 
paid sick leave. As explained in the NPRM, an employee who receives 
different pay and benefits for different portions of her work (for 
example, an employee who works as a carpenter on one DBA-covered 
contract and a skilled laborer on another DBA-covered contract on which 
she works for the same contractor), the pay and benefits due while the 
employee uses paid sick leave is to be determined based on which work 
she would have been performing at the time she uses the leave. The 
employee's pay rate at the time she accrued the paid sick leave is not 
relevant.
    Delta asked that the Department amend this provision to state that 
employees need not receive premium pay they would otherwise have 
received if using paid sick leave, and Vigilant similarly asked the 
Department to state that employees receive only straight time, rather 
than overtime, pay while using paid sick leave. To provide clarity in 
response to these comments, the Department has added the word 
``regular'' before ``pay'' in the regulatory text. As indicated in the 
regulatory text, this addition is meant to indicate that only payments 
that would be included in the calculation of the employee's regular 
rate for hours worked under the FLSA (or basic rate for purposes of the 
Contract Work Hours and Safety Standards Act, 40 U.S.C. 3701 et seq. 
(CWHSSA)) must be provided to an employee using paid sick leave to 
fulfill the obligation to provide the same pay to that employee. The 
relevant FLSA principles (adopted under CWHSSA, see 29 CFR 5.15(c)) are 
set forth at 29 CFR part 778.
    AGC indicated that it believed this provision required that 
contractors provide employees with their pay and benefits in cash 
rather than, for example, as contributions to fringe benefit trust 
funds. The Department wishes to clarify it did not intend this result; 
employees using paid sick leave must receive the same pay and benefits 
they would have had they not been absent from work, and any benefits 
should generally be provided in the same manner as an employee receives 
them at other times. For example, if a contractor provides its 
employees with health insurance coverage by making monthly payments to 
a third-party insurer on behalf of each employee, the contractor must 
not make any reduction in such payments to account for time an employee 
used paid sick leave. Or if a contractor satisfies its DBA health and 
welfare requirements by making contributions to a benefit fund of a 
certain amount per hour that an employee works on DBA-covered 
contracts, it must continue to make the same payments when an employee 
is using paid sick leave. To the extent a contractor is unable to 
provide the same benefits during time an employee is using paid sick 
leave that it does when an employee is working, such as because the 
benefit plan to which the contractor makes contributions will not 
accept them for non-work time and an amendment to the plan is not 
feasible,

[[Page 67636]]

the contractor may instead provide cash or another benefit of the same 
or greater value as the benefit it cannot provide. The Department notes 
that this exception to the general requirement to provide the same 
benefits is limited to circumstances in which doing so is infeasible.
    The Department adopts Sec.  13.5(c)(3) essentially as proposed, but 
with a minor modification (the words ``had the employee not used paid 
sick leave'' are replaced with ``had the employee not been absent from 
work'') for technical accuracy.
    Proposed Sec.  13.5(c)(4) prohibited a contractor from limiting the 
amount of paid sick leave an employee may use per year or at once. In 
other words, although a contractor could limit an employee's accrual of 
paid sick leave to 56 hours per year, a contractor could not prohibit 
the employee from, for example, using 16 hours carried over from the 
year 1, accruing 56 additional hours, and then using all 56 hours 
accrued in year 2 even though her total use in year 2 would exceed 56 
hours. Under the proposed text, an employer also could not limit the 
amount of paid sick leave an employee may use at one time. For example, 
an employer could not establish a policy prohibiting employees from 
using any particular number of hours of paid sick leave in a single 
workweek. Similarly, an employer could not deny an employee's request 
to use paid sick leave for 2 full days in a row based on the length of 
time requested (as long as the employee had accrued sufficient paid 
sick leave to cover the time). Seyfarth Shaw, the Chamber/IFA, and the 
American Benefits Council strongly encouraged the Department not to 
prohibit contractors from setting a limit on use per year, and 
specifically asked that the Department allow contractors to limit use 
of paid sick leave to 56 hours per year. Seyfarth Shaw suggested in the 
alternative than an 80-hour usage cap would be appropriate. The 
Department has considered these suggestions but has decided not to 
adopt them because the Executive Order does not call for a cap on the 
amount of paid sick leave an employee can use in a year but does 
effectively create limits on use by allowing for limits on accrual, 
which are implemented in Sec.  13.5(b). In light of this reasoning, the 
Department is amending the regulatory text to clarify that an 
employee's use of paid sick leave may be limited by the amount of paid 
sick leave an employee has available for use.
    Proposed Sec.  13.5(c)(5) prohibited a contractor from making an 
employee's use of paid sick leave contingent on the employee's finding 
a replacement worker to cover any work time to be missed or the 
fulfillment of the contractor's operational needs. This language 
implemented section 2(e) of the Executive Order and made explicit the 
important point that the intent of the Executive Order could only be 
fulfilled if employees are entitled to use paid sick leave even if the 
need for such leave arises at a time that is inconvenient for a 
contractor. PSC, AAR, and EEAC urged the Department to indicate in the 
regulations that employees should consult with contractors about 
scheduling foreseeable paid sick leave, noting that language to that 
effect appears in the FMLA regulations. PSC pointed to the difficulties 
that would arise if, for example, the four security guards a contractor 
sends to a Federal courthouse all request to use paid sick leave for 
doctor's appointments on the same morning. Although the Department is 
not altering the fundamental premise of this provision, it has amended 
the regulatory language in recognition of these commenters' concerns. 
Specifically, it has inserted language modeled on 29 CFR 825.302(e), 
the FMLA provision to which the commenters referred; the new text 
provides that an employee is encouraged to make a reasonable effort to 
schedule preventive care or another foreseeable need to use paid sick 
leave to suit the needs of both the contractor and employee, and a 
contractor may ask an employee to make a reasonable effort to schedule 
foreseeable absences for paid sick leave so as to not disrupt unduly 
the contractor's operations, but a contractor may not make an 
employee's use of paid sick leave contingent on the employee's finding 
a replacement worker to cover any work time to be missed or on the 
fulfillment of the contractor's operational needs. The Department notes 
that because employees will have far less paid sick leave than they do 
FMLA leave and because paid sick leave will often involve far less 
serious health conditions than are involved when an employee takes FMLA 
leave, the risk of disruption is not as high in this context, so no 
greater protections for employers are necessary.
    Proposed Sec.  13.5(d) implemented section 2(h) of Executive Order 
13706 by addressing an employee's request to use paid sick leave. 
Proposed Sec.  13.5(d)(1) required a contractor to permit an employee 
to use any or all of the employee's available paid sick leave upon the 
oral or written request of an employee that includes information 
sufficient to inform the contractor that the employee is seeking to be 
absent from work for a purpose described in Sec.  13.5(c)(1) and, to 
the extent reasonably feasible, the anticipated duration of the leave. 
Proposed Sec.  13.5(d)(1) further required the request to be directed 
to the appropriate personnel pursuant to a contractor's policy or, in 
the absence of a formal policy, any personnel who typically receive 
requests for other types of leave or otherwise address scheduling 
issues on behalf of the contractor.
    The NPRM explained that employees could request paid sick leave by 
any oral or written method, including in person, by phone, via email, 
or with a note reasonably calculated to provide timely notice of the 
employee's intent to take leave, although as explained below, in 
response to comments, the Department now notes that a contractor's 
policy may provide specific methods of communicating a request. 
Additionally, although the request needed to contain sufficient 
information for a contractor to determine whether it is a proper use of 
paid sick leave, and the contractor could ask questions tailored to 
making that determination, the request was not required to contain 
extensive or detailed information about the reason for the leave and a 
contractor is not permitted to require such information. Specifically, 
under the proposed approach, the employee needed only to provide 
information sufficient to inform the contractor that she wished to miss 
work for a reason that is a permissible use of paid sick leave and was 
not required to specify all symptoms or details of the need for leave. 
The Department has inserted language to this effect into the regulatory 
text, included as part of Sec.  13.5(d)(1)(i), to ensure clarity.
    As also noted in the NPRM and now provided in Sec.  13.5(d)(1)(i), 
an employee's request to use paid sick leave need not include a 
specific reference to the Executive Order or part 13 or even use the 
words ``sick leave'' or ``paid sick leave''; this language is modeled 
on a portion of the FMLA regulations regarding the content of an 
employee's notice to an employer of the need to use FMLA leave. See 29 
CFR 825.301(b) (``An employee giving notice of the need for FMLA leave 
does not need to expressly assert rights under the Act or even mention 
the FMLA to meet his or her obligation to provide notice, though the 
employee would need to state a qualifying reason for the needed 
leave.''); see also 29 CFR 825.302(c). Under Sec.  13.5(d)(1)(i), an 
employee could simply state, for example, that the employee has a cold, 
a dentist appointment, or an appointment with an attorney regarding a 
domestic

[[Page 67637]]

violence matter. In such cases, a contractor could not ask (for 
purposes of approving or rejecting the request to use paid sick leave) 
when the cold began or how severe it is, which dentist the employee is 
seeing or for what purpose, or for any detail regarding the 
circumstances of the domestic violence.
    The NPRM further explained that under the proposed provision, an 
employee was not required to include in her request extensive details 
regarding the employee's relationship with an individual for whom the 
employee wished to care in the time absent from work; she only needed 
to inform the contractor that she has a family or family-like 
relationship with the individual. The Department has added this point 
to Sec.  13.5(d)(1)(i) for clarity. As explained in the NPRM, simply 
stating, for example, that the employee's son has a stomach bug, the 
employee's wife was injured in a car accident, or the employee's father 
needs assistance going to a doctor's appointment was sufficient under 
this proposed approach. For a request for paid sick leave involving 
providing care for an individual related by blood or affinity whose 
close association with the employee is the equivalent of a family 
relationship, the employee need only assert that a family or family-
like relationship exists, such as by stating that the employee needs to 
care for her ill grandmother or needs to accompany a man who is like a 
brother to him to a doctor's appointment. As also noted in the NPRM, 
although a contractor may ask questions to determine if the use of paid 
sick leave is justified, such as inquiring of an employee who asks to 
take leave to care for a close friend who was in a car accident whether 
that friend is someone whom the employee considers to be like family, 
the contractor could not demand intimate details upon receiving a 
positive response to such an inquiry. Although the Department 
recognizes that paid sick leave is available for only particular uses, 
it interprets Executive Order 13706 as intending to provide paid sick 
leave in a manner that is not burdensome for employees and does not 
allow significant intrusion into their personal lives by their 
employers.
    The NPRM also explained that under proposed Sec.  13.5(d)(1), the 
request to use paid sick leave should provide an estimate of the timing 
and amount of such leave needed to the extent reasonably feasible. This 
requirement is satisfied by stating that the sick employee hopes only 
to be out for 1 day, that the child's dentist appointment is on a 
particular date at 10 a.m. and is not anticipated to take more than an 
hour, or that the appointment with the attorney related to a domestic 
violence matter is on a particular date at 2 p.m. and will likely 
continue for the remainder of the work day. The contractor may not hold 
an employee to the estimate provided in the request; for example, the 
sick employee could return to work in the afternoon if he recovers more 
quickly than he expected, and an employee can use more than an hour of 
paid sick leave (provided he has more than 1 hour available for use) if 
the dentist appointment runs longer than anticipated. To ensure that 
this point is clear to the regulated community, the Department has 
included it as Sec.  13.5(d)(1)(ii).
    Finally, the Department explained in the NPRM that under proposed 
Sec.  13.5(d)(1), an employee's request to use paid sick leave would be 
acceptable if the employee directs it to the appropriate personnel 
pursuant to a contractor's policy or, in the absence of a formal 
policy, any personnel who typically receive requests for other types of 
leave on behalf of the contractor, such as a supervisor or human 
resources department staff. A few commenters addressed the use of an 
employer's usual procedures for requesting time off of work. AAR asked 
that the Department allow contractors to use their normal procedures; 
EEAC asked that the Department explicitly require employees to use a 
contractor's policy; Vigilant asked that the Department state it is 
usually reasonable to comply with the contractor's call-in policy; and 
the UFCW asked the Department to clarify whether a contractor may deny 
an employee's request for paid sick leave because the employee failed 
to use the contractor's typical procedures.
    Because not all contractor policies will comply with the 
requirements of the Executive Order (for example, a policy might not 
permit an employee to make oral or written requests for leave as 
described in section 2(h) of the Order), the Department has not 
modified the relevant proposed text, which now appears as Sec.  
13.5(d)(1)(iii), in response to these comments; because a contractor's 
policy may govern how an employee must make requests to use paid sick 
leave, however, the Department provides more detail here about the 
provision's meaning. Under the regulatory text as proposed and adopted, 
if a contractor has a policy regarding to whom an employee should 
submit leave requests, it may require the employee to direct her 
request to use paid sick leave to particular personnel pursuant to that 
policy. The policy may include particular procedures to use to contact 
the specified personnel, such as a designated phone number or email 
address, as long as--pursuant to the Executive Order's requirement that 
contractors accept ``oral or written'' requests, 80 FR 54698--the 
employee may communicate the request by at least one oral and at least 
one written method. If the employee directs a request to someone who is 
not the individual or individuals identified in the contractor's 
policy, the recipient may formally reject the request or explain that 
she is without authority to respond to it, in either case informing the 
employee of the correct personnel to whom to direct a new request, or 
the recipient may forward the request to the correct personnel herself.
    Finally, the Department noted in the NPRM that pursuant to 
Sec. Sec.  13.5(e)(1)(ii) and 13.25(d), when an employee requests leave 
for the purposes described in proposed Sec.  13.5(c)(1)(iv), i.e., for 
absences related to being a victim of domestic violence, sexual 
assault, or stalking, the contractor shall maintain confidentiality 
about the domestic abuse, sexual assault, or stalking, unless the 
employee consents or when disclosure is required by law. For 
completeness and clarity, the Department has added to the regulatory 
text, as Sec.  13.5(d)(1)(iv), a general reference to the 
confidentiality requirements described in Sec.  13.25(d), which apply 
to information a contractor obtains in the course of receiving requests 
to use paid sick leave for any purpose as well as to information an 
employee may provide pursuant to the certification and documentation 
provisions described below.
    Proposed Sec.  13.5(d)(2) provided that if the need to use paid 
sick leave is foreseeable, the employee's request shall be made at 
least 7 calendar days in advance, whereas if the employee is unable to 
request leave at least 7 calendar days in advance, the request shall be 
made as soon as is practicable. The term as soon as is practicable is 
defined in Sec.  13.2. Proposed Sec.  13.5(d)(2) further provided that 
when an employee becomes aware of a need to use paid sick leave less 
than 7 calendar days in advance, it should typically be practicable for 
the employee to make a request for leave either the day the employee 
becomes aware of the need to use paid sick leave or the next business 
day, but notes that in all cases, the determination of when an employee 
could practicably make a request must take into account the individual 
facts and circumstances.
    The Department explained in the NPRM that it would consider any 
request made on the day the employee becomes aware of the need to take 
paid

[[Page 67638]]

sick leave or the following business day to have been made as soon as 
was practicable; although it would not presume that requests made 
beyond that time frame were made as soon as practicable, the facts and 
circumstances of the specific situation could be such that despite the 
longer delay, the employee did in fact notify the employer as soon as 
was possible and practical. As explained in the NPRM, for example, if 
an employee makes an appointment for his daughter to have an annual 
exam with her doctor 2 weeks in the future, the employee should ask to 
use paid sick leave to take his daughter to the appointment at least 7 
calendar days before the date on which it is scheduled. If instead the 
nurse at the employee's daughter's school called one afternoon to say 
the daughter had a high fever and he needed to take her out of school 
right away, he could plainly not have requested leave 7 days in 
advance, and he should instead request leave as soon as is practicable. 
Depending on the circumstances, such as how much attention the daughter 
needed, whether the employee had access to a phone or computer, and/or 
whether the person to whom the request would be directed was available, 
in this situation, as soon as practicable could be as the employee was 
preparing to leave work to get his daughter, when he got home with his 
daughter, later that evening (perhaps after she was asleep), or the 
next morning (assuming the following day was a business day). If, on 
the other hand, the employee himself was in a serious car accident, was 
taken to the hospital, and had surgery the next day, he could not 
practicably have requested leave the day of the accident or of the 
surgery (i.e., the day he became aware of the need for leave or the 
following day).
    AAR commented that under the FMLA, foreseeable requests for leave 
are to be made 30 days in advance, and there is no reason to have a 
shorter period of 7 days in the paid sick leave context. But the 7-day 
time frame implements section 2(h) of the Executive Order, which 
specifically provides that requests be made ``at least 7 calendar days 
in advance where the need for the leave is foreseeable,'' so the 
Department cannot accept this suggestion. In other words, an employer 
may not require notice more than 7 days in advance of the employee's 
intent to use leave for a foreseeable purpose. The Department also 
notes that because paid sick leave will often involve shorter periods 
of absence than FMLA leave, which can be up to 12 weeks in duration, it 
will generally not be as difficult for contractors to plan around 
employee absences in the paid sick leave context. The Department adopts 
Sec.  13.5(d)(2) as proposed but with minor, non-substantive 
modifications for clarity.
    The NPRM further explained, and the Department reiterates, that if 
an employee did not comply with the requirements of Sec.  13.5(d)(2), a 
contractor could properly deny the employee's request to use paid sick 
leave. For example, if an employee arranges a doctor's appointment for 
his son 3 weeks in advance but does not submit a request to use paid 
sick leave until 2 days before the appointment, the contractor may 
properly deny that request. Denial of the request would not be proper, 
however, if the need for leave was not foreseeable and the employee 
made the request as soon as was practicable, such as if upon making the 
request 2 days in advance, the employee explained that his husband had 
planned to take their son to the appointment, but the husband learned 
on the morning the employee submitted the request that the husband 
would be unavailable at the time of the appointment, and the couple 
decided that the employee would have to take the son instead.
    Proposed Sec.  13.5(d)(3) addressed a contractor's response to an 
employee's request to use paid sick leave. Proposed Sec.  13.5(d)(3)(i) 
permitted a contractor to communicate its grant of a request to use 
paid sick leave either orally or in writing provided that the 
contractor also complied with the requirement in Sec.  13.5(a)(2) to 
inform the employee in writing of the amount of paid sick leave the 
employee has available for use. The Department did not receive comments 
regarding this provision specifically but has modified it to reflect 
that Sec.  13.5(a)(2) no longer requires a contractor to inform an 
employee of the amount of paid sick leave she has available for use 
upon each request to use paid sick leave and to note that a written 
communication may be provided electronically, if the contractor 
customarily corresponds with or makes information available to its 
employees by such means.
    Proposed Sec.  13.5(d)(3)(ii) required a contractor to communicate 
any denial of a request to use paid sick leave in writing, with an 
explanation for the denial. PSC commented that a contractor's denial of 
a request to use paid sick leave should not have to be in writing. The 
Department is not adopting this suggestion because it believes written 
denials are advantageous for both employees and contractors. By 
providing the employee with a written statement of the reason for the 
denial, the contractor most effectively communicates what types of 
requests will be denied in the future and ensures that the WHD has a 
written record of the contractor's rationale in the event the employee 
were to file an interference complaint. EEAC asked that the Department 
be explicit that it considers electronic communication to satisfy this 
requirement. The Department believes it is appropriate for a contractor 
to communicate denials via electronic means, such as an email or text 
message, provided that the contractor customarily corresponds with or 
makes information available to its employees by such means; it has 
added language to this effect to the regulatory text.
    Proposed Sec.  13.5(d)(3)(ii) further provided that denial is 
appropriate if, for example, the employee did not provide sufficient 
information about the need for paid sick leave; the reason given is not 
consistent with the uses of paid sick leave described in Sec.  
13.5(c)(1); the employee did not indicate when the need would arise; 
the employee has not accrued, and will not have accrued by the date of 
leave anticipated in the request, a sufficient amount of paid sick 
leave to cover the request (in which case, if the employee will have 
any paid sick leave available for use, only a partial denial would be 
appropriate); or the request is to use paid sick leave during time the 
employee is scheduled to be performing non-covered work. The proposed 
text also explained that if the denial is based on insufficient 
information provided in the request, such as if the employee did not 
state the time of an appointment with a health care provider, the 
contractor must permit the employee to submit a new, corrected request. 
The Department further proposed that if the denial is based on an 
employee's request to use paid sick leave during time she is scheduled 
to be performing non-covered work, the denial must be supported by 
records adequately segregating the employee's time spent on covered and 
non-covered contracts. Seyfarth Shaw commented that this list of 
reasons a contractor may properly deny a request to use paid sick leave 
is helpful for contractors seeking to avoid accusations of interfering 
with employees' rights. The Department appreciates that contractors 
must be able to administer paid sick leave in a reasonable manner, and 
adopts this text as proposed.
    IEC, the American Staffing Association, and TrueBlue, Inc. 
requested that the Department permit a contractor to prohibit an 
employee from using paid sick leave until the employee has worked for 
the contractor for 90 days. Although the Department recognizes that 
such a delay may be

[[Page 67639]]

consistent with some contractors' existing practices, the Department 
declines to adopt this suggestion for purposes of the Executive Order 
because the Order itself provides for no such delay and the Department 
believes the purposes of providing access to paid sick leave are best 
fulfilled by ensuring that employees have such access throughout their 
employment, including early in their tenure with a new employer.
    Proposed Sec.  13.5(d)(3)(iii) required a contractor to respond to 
any request to use paid sick leave as soon as is practicable after the 
request is made. As proposed, it further explained that, although the 
determination of when it is practicable for a contractor to provide a 
response would take into account the individual facts and 
circumstances, it should in many circumstances be practicable for the 
contractor to respond to a request immediately or within a few hours. 
The proposed provision further explained that in some instances, such 
as if it is unclear at the time of the request whether the employee 
will be working on or in connection with a covered or non-covered 
contract at the time for which paid sick leave is requested, as soon as 
practicable could mean within a day or no longer than within a few 
days. PSC, the American Benefits Council, and Vigilant objected to the 
Department's suggestion that a contractor could respond to a request 
immediately or within a few hours; in particular, Vigilant noted that 
in many cases, the individual who receives the request would have to 
check with the human resources department to determine whether the 
employee had paid sick leave available for use before responding to the 
employee. The Department does not disagree with the comments but also 
does not believe modification of the proposed regulatory text is 
necessary. In some circumstances, such as if a contractor with only a 
small number of employees who knows they have all accrued some paid 
sick leave faces a request from an employee to leave work 1 hour early 
because his son is sick, or if a large contractor has an information 
technology system in place that allows a supervisor or human resources 
professional who handles leave requests to immediately check how much 
paid sick leave an employee has available for use, an immediate or very 
prompt response will be possible. As the regulatory text acknowledges, 
under other circumstances--such as if the human resources office with 
paid sick leave accrual information is unreachable at the time the 
request is made or the employee's schedule at the time he needs to be 
absent is not yet determined--there will be reasons that the response 
to a request will necessarily be delayed. The Department does not mean 
to, and did not, indicate that a very short time frame for response 
will always be required; its language is meant instead to indicate that 
employers should respond to requests to use paid sick leave as promptly 
as is reasonable under the circumstances.
    Proposed Sec.  13.5(e) implemented section 2(i) of the Executive 
Order, which addresses certification and documentation for leave of 3 
or more consecutive workdays.
    Under proposed Sec.  13.5(e)(1)(i), a contractor could require 
certification issued by a health care provider to verify the need for 
paid sick leave used for the purposes listed in proposed Sec.  
13.5(c)(1)(i), (ii), or (iii) only if the employee is absent for 3 or 
more consecutive full workdays. Under the proposed provision, a 
contractor could not require certification to justify the use of paid 
sick leave for any amount of time shorter than 3 consecutive full 
workdays. For instance, if an employee is scheduled to work from 9am to 
5pm on Monday, Tuesday, and Wednesday, and he is unable to come to work 
at all during those times because he is hospitalized due to a severe 
infection, his employer could require that he provide certification 
issued by a health care provider. On the other hand, if the employee 
uses 4 hours of paid sick leave on Monday because his daughter's school 
nurse calls in the early afternoon to say his daughter has a fever and 
must be taken home, all 8 hours on Tuesday because he stays home with 
his ill daughter, and another 2 hours on Wednesday because his daughter 
is not well enough to go to school on time, his employer could not 
require certification because he has not used paid sick leave for all 
of his scheduled time on 3 consecutive full workdays. (The definition 
of certification issued by a health care provider appears in Sec.  
13.2.) Proposed Sec.  13.5(e)(1)(i) further required the contractor to 
protect the confidentiality of any certification as required by Sec.  
13.25(d). The Department received no comments specifically regarding 
this provision and adopts it as proposed but with a minor correction to 
accurately reflect that the use of paid sick leave would be for one of 
the purposes described in Sec.  13.5(c)(1)(i), (ii), or (iii), rather 
than all of them.
    Proposed Sec.  13.5(e)(1)(ii) addressed documentation to verify the 
use of paid sick leave for the purposes listed in Sec.  13.5(c)(1)(iv), 
i.e., for absences related to domestic violence, sexual assault, or 
stalking. Specifically, it permitted a contractor to require 
documentation from an appropriate individual or organization to verify 
the need for such leave only if an employee uses paid sick leave on 3 
or more consecutive full workdays for such purposes. The NPRM explained 
that such documentation could come from any person involved in 
providing or assisting with the care, counseling, relocation, 
assistance of a victim services organization, or related legal action, 
such as, but not limited to, a health care provider, counselor, 
employee of the victim services organization, or attorney. The Women's 
Law Project, NWLC, and a group of organizations ``dedicated to 
preventing, addressing, and ending domestic violence and sexual 
assault'' suggested that the Department move this explanatory text to 
the regulation itself to prevent any confusion among contractors about 
the broad set of possible sources of acceptable documentation. These 
commenters also asked that the Department add clergy members, as well 
as family and close friends, to the illustrative list of individuals 
who can provide the documentation, and that the Department permit self-
certification because there are instances in which an employee has not 
told anyone about the domestic violence, sexual assault, or stalking 
situation she faces. Because the Department agrees with these 
commenters that the broad scope of possible documentation for the 
varied and difficult circumstances related to domestic violence, sexual 
assault, and stalking was not fully articulated in the proposed 
regulatory text, and in the interest of minimizing any burden on 
victims who wish to limit the number of people to whom they reveal 
information about the situations they are facing, the Department has 
modified the text of Sec.  13.5(e)(1)(ii) to incorporate each of these 
suggestions. The Department notes that the paid sick time laws in 
Massachusetts and Seattle also permit self-certification when leave is 
used for purposes like those described in Sec.  13.5(c)(1)(iv). See 90 
Mass. Code Regs. 33.06(2)(b)(vi); Seattle, Wash. Mun. Code Sec.  
14.16.030(F)(2)(d).
    Proposed Sec.  13.5(e)(1)(ii) also provided that a contractor may 
only require that such documentation contain the minimum necessary 
information establishing the need for the employee to be absent from 
work. This portion of the provision was not the subject of any comments 
and is adopted as proposed. As explained in the NPRM, the documentation 
could, for example, consist of a note from a social worker at

[[Page 67640]]

a victim services organization stating that the employee received 
services from the organization related to being a victim of domestic 
violence and moved to a new home for reasons related to the domestic 
violence, as well as a receipt from a moving company or a note from a 
landlord that indicates the date(s) of the move; it need not name the 
perpetrator of the domestic violence, the nature of the acts that 
constitute domestic violence, the addresses of the old or new homes, or 
any other details beyond those sufficient to make clear that the time 
was used for a purpose that justifies the use of paid sick leave. As 
another example, documentation could consist of a letter from a legal 
services attorney or sexual assault victim advocate who is assisting an 
employee who is a victim of sexual assault in completing the paperwork 
related to and filing for a civil protection order or restraining 
order, explaining that the employee spent time (consisting of most 
business hours over 3 consecutive days) with the attorney or advocate 
preparing for the hearing, including completing the petition for the 
court's order and obtaining a time for the hearing as well as attending 
the hearing, including waiting at the courthouse and attending the 
proceedings; the letter would not need to explain the circumstances of 
the sexual assault, name the person(s) accused of the sexual assault, 
or otherwise provide any details beyond those sufficient to justify the 
need to use paid sick leave. Similarly, if the employee used 3 or more 
consecutive full workdays of paid sick leave to fly across the country 
to be with her daughter who is a victim of sexual assault to provide 
support related to an administrative hearing at the university the 
daughter attends, documentation could consist of the boarding passes 
from the employee's plane flights and emails from a university official 
to the daughter setting the date of the hearing, without providing 
details about the specific subject matter of the hearing.
    Proposed Sec.  13.5(e)(1)(ii) prohibited a contractor from 
disclosing any verification information and reiterated that the 
contractor must maintain confidentiality about the domestic abuse, 
sexual assault, or stalking as required by Sec.  13.25(d). This 
sentence is adopted as proposed.
    PSC and AGC urged the Department to permit contractors to request 
certification for leave of less than 3 days if an employee's use of 
paid sick leave occurs in a pattern that the employer believes suggests 
abuse (such as if an employee repeatedly uses paid sick leave on 
Fridays or Mondays). Because the Executive Order provides that a 
contractor may only require certification or documentation if an 
employee is absent for 3 or more consecutive days, 80 FR 54698, the 
Department declines to adopt the suggestion that in some circumstances, 
contractors be permitted to require certification or documentation for 
shorter periods of leave. The Department further addresses suspected 
abuse of paid sick leave by employees, including by noting that 
contractors may investigate such situations, in the discussion of Sec.  
13.6 below.
    Proposed Sec.  13.5(e)(2), which was derived from the FMLA 
regulations at 29 CFR 825.122(k), provided that if certification or 
documentation is to verify the illness, injury, or condition, need for 
diagnosis, care, or preventive care, or activity related to domestic 
violence, sexual assault, or stalking of an individual related to the 
employee as described in Sec.  13.5(c)(1)(iii), a contractor could also 
require the employee to provide reasonable documentation or a statement 
of the family or family-like relationship. Proposed Sec.  13.5(e)(2) 
further explained that this documentation could take the form of a 
simple written statement from the employee or could be a legal or other 
document proving the relationship, such as a birth certificate or court 
order. EEAC noted its approval of this proposed requirement, and the 
Department adopts it as proposed. As noted in the NPRM, like under the 
FMLA, such a written statement from the employee need not be notarized. 
Additionally, a contractor is entitled to examine any legal or other 
documentation provided, but the employee is entitled to the return of 
any official document submitted for this purpose, such as a birth 
certificate. The Department also notes that if an employee has already 
submitted proof of a family or family-like relationship to the 
contractor for some other purpose, such as providing a marriage 
certificate in order to obtain health care benefits for the employee's 
spouse, such proof is sufficient to confirm the family relationship for 
purposes of paid sick leave, and the contractor may not require 
additional documentation.
    Proposed Sec.  13.5(e)(3) addressed timing with respect to 
certification and documentation. Proposed Sec.  13.5(e)(3)(i) allowed a 
contractor to require certification or documentation only if the 
contractor informs an employee before the employee returns to work that 
certification or documentation would be required to verify the use of 
paid sick leave if the employee is absent for 3 or more consecutive 
full workdays. The Department viewed this time limit as necessary 
because without notice at the time the employee or individual cared for 
by the employee has the condition or need justifying the use of paid 
sick leave, it could become difficult or even impossible for the 
employee to obtain certification. For example, if an employee has the 
flu for 4 days, without knowing that the contractor wishes her to 
provide certification from a health care provider verifying that she 
was sick, she might well recover fully without contacting a doctor. The 
Department further explained in the NPRM but not the regulatory text 
that a contractor's general policy, if made clear to employees (such as 
in an employee handbook), requiring certification of the use of paid 
sick leave for absences of 3 or more consecutive full workdays would 
suffice to meet this requirement.
    The AFL-CIO was generally supportive of this provision. Other 
commenters had conflicting views regarding whether notification in an 
employee handbook should be sufficient to meet this obligation: EEAC 
asked that a statement that such notice would fulfill this requirement 
appear in the regulatory text, whereas the Center for WorkLife Law 
suggested that the Department disallow such general notice but instead 
require actual notice to an employee at the time the employee is using 
leave (a requirement that would be consistent with the analogous FMLA 
provision, 29 CFR 825.305(a), which provides that ``[a]n employer must 
give notice of a requirement for certification each time a 
certification is required'').
    Because the Department recognizes both the importance of employees 
being notified of the need to acquire certification or documentation 
and the potential burden on contractors that would be associated with 
informing each employee of its policy each time she requested to use 
leave, the Department is addressing these comments by adding to Sec.  
13.5(e)(3) a statement that the contractor may inform an employee of 
this requirement each time the employee requests to use or does use 
paid sick leave, or the contractor may inform employees of a general 
policy to require certification or documentation for absences of 3 or 
more consecutive full workdays if it does so in a manner reasonably 
calculated to provide actual notice of the requirement to employees. 
Whether employees have received actual notice will depend on the 
particular circumstances, but in general, the Department will not 
consider simply including an explanation of the requirement in a 
lengthy handbook to be sufficient to show the employer has ensured that 
its

[[Page 67641]]

employees had actual notice. Explaining the policy orally when an 
employee is hired, reiterating the policy periodically in email 
reminders or at human resources trainings, and including it in an 
employee handbook to which the employee can refer at later dates, 
however, would satisfy the actual notice requirement, as would 
prominently posting the policy on a Web page from which employees can 
submit electronic requests to use paid sick leave.
    Under proposed Sec.  13.5(e)(3)(ii), a contractor could require the 
employee to provide certification or documentation within 30 days of 
the first day of the 3 or more consecutive full workdays of paid sick 
leave but could not set a shorter deadline for its submission. This 
requirement is set forth in section 2(i) of the Executive Order. 80 FR 
54698. No commenter addressed it, and it is adopted as proposed.
    Proposed Sec.  13.5(e)(3)(iii) addressed the period between an 
employee's using paid sick leave for which a contractor properly 
requires certification or documentation and the employee's submission 
of such certification and documentation, as well as how a contractor 
can respond to insufficient certification or documentation. It is 
adopted largely as proposed, but with modifications as described. 
First, proposed Sec.  13.5(e)(3)(iii) required that while a contractor 
is waiting for or reviewing certification or documentation, it must 
treat the employee's otherwise proper request for 3 or more consecutive 
full workdays of paid sick leave as valid. Vigilant asked that the 
Department change this provision such that the contractor would not 
treat an employee's absence as paid sick leave until after receiving 
sufficient certification or documentation. The Department recognizes 
that because it is not possible to immediately resolve the issue of 
whether an employee's absence of 3 or more days from work is properly 
treated as time using paid sick leave, either the contractor or the 
employee must bear the risk of an incorrect assumption while the 
determination is pending. Permitting an employer to wait to pay an 
employee for the time would create a significant deterrent to the use 
of paid sick leave at times when an employee's need is likely greatest 
(because relatively longer leave will often be for an acute or severe 
issue). For these reasons, and because recoupment of payments made for 
paid sick leave after a proper retroactive denial of that leave is 
permitted under the Order and part 13 in the circumstances explained 
below, the Department believes it is more appropriate to ensure that 
the employee receives the pay and benefits she would have earned had 
she been working than to delay such payment to the employee.
    Proposed Sec.  13.5(e)(3)(iii) also explained that if the 
contractor ultimately does not receive certification or documentation, 
or if the certification or documentation the employee provides is 
insufficient to verify the employee's need for paid sick leave, the 
contractor could, within 10 calendar days of the deadline for receiving 
the certification or documentation or within 10 calendar days of the 
receipt of the insufficient certification or documentation, whichever 
occurs first, retroactively deny the employee's request to use paid 
sick leave.
    The Department explained in the NPRM that certification or 
documentation could be insufficient, for example, because it did not 
describe a need for leave consistent with the permitted reasons for 
using paid sick leave or because, if the leave was for a purpose other 
than that described in Sec.  13.5(c)(1)(iv), it was not created or 
signed by a health care provider or a health care provider's 
representative. The Center for WorkLife Law commented that the 
Department should require the contractor to give an employee notice 
that her certification or documentation is insufficient and allow her 
at least 5 days to cure the deficiency. Because the Department agrees 
that it is appropriate to give employees, who will often be unfamiliar 
with the rules regarding certification and documentation, a second 
chance to justify their use of a substantial portion of their accrued 
paid sick leave, the Department has modified the regulatory text to 
implement this suggestion. Specifically, Sec.  13.5(e)(3)(iii) now 
provides that if an employee provides certification or documentation 
that is insufficient to verify the employee's need for paid sick leave, 
the contractor shall notify the employee of the deficiency and allow 
the employee at least 5 days to provide new or supplemental 
certification or documentation. If after 30 days the employee has not 
provided any certification or documentation, or if after the 5 or more 
days allowed for resubmission the employee has either provided no new 
or supplemental certification or documentation or the new certification 
or documentation is still insufficient to verify the employee's need 
for paid sick leave, the contractor may, within 10 calendar days of the 
employee's deadline for providing sufficient certification or 
documentation, retroactively deny the employee's request to use paid 
sick leave.
    Proposed Sec.  13.5(e)(3)(iii) further provided that if the 
contractor retroactively rejected the employee's request, the 
contractor could recover the value of the pay and benefits the employee 
received but to which the employee was not entitled, including through 
deduction from any sums due to the employee (e.g., unpaid wages, 
vacation pay, profit sharing, etc.), provided such deductions do not 
otherwise violate applicable Federal or State wage payment or other 
laws. This language was derived from the FMLA regulations regarding the 
consequences of an employee's failure to return to work after an 
employer paid for health or non-health benefit premiums while an 
employee was on FMLA leave. See 29 CFR 825.213(f). If a contractor 
retroactively denied an employee's request to use paid sick leave, the 
NPRM explained, the contractor was required to reinstate the amount of 
paid sick leave the employee was treated as having used to the 
employee.
    Delta commented that the NPRM did not address a contractor's 
options if a State law does not permit recoupment of wages paid and 
suggested that the contractor be permitted to treat the absence as paid 
sick leave but nevertheless count the absence against the employee in 
the contractor's time and attendance policy. The Department does not 
agree with this suggestion. If a contractor could properly 
retroactively deny an employee's request to use paid sick leave but may 
not recoup relevant payments made, the contractor has two options. It 
may treat the time as paid sick leave, in which case the contractor 
must comply with all of the requirements of the Order and part 13 with 
respect to that time, including the prohibitions on interference and 
discrimination (that is, it may not count the absence against the 
employee under its attendance policy) but the employee will have less 
paid sick leave available for use going forward. Or it may elect not to 
treat the time as paid sick leave, in which case it may count the 
absence against the employee under its attendance policy but it must 
restore the hours of paid sick leave the employee attempted to use to 
the amount of paid sick leave the employee has available for use. This 
portion of the provision is therefore adopted as proposed, except that 
the reference to Federal or State wage payment laws has been corrected 
to refer to Federal, State, or local wage payment laws.
    Proposed Sec.  13.5(e)(4) permitted a contractor to contact the 
health care provider or other individual who

[[Page 67642]]

created or signed the certification or documentation only for purposes 
of authenticating the document or clarifying its contents and further 
explained that the contractor could not request additional details 
about the medical or other condition referenced, seek a second opinion, 
or otherwise question the substance of the certification. Under the 
proposal, authentication meant verifying that the health care provider 
or other individual did in fact create or sign the certification. 
Clarifying meant asking what illegible handwriting or other unreadable 
text says or asking for an explanation of the meaning of words used or 
information contained in the certification. Under the proposal, which 
was consistent with requirements regarding certification under the 
FMLA, see 29 CFR 825.307, a contractor could not ask the health care 
provider or other individual who created or signed the certification or 
other documentation for more information than necessary to verify that 
the employee was justified in using paid sick leave. The specific 
information required would vary depending upon the reason for the 
leave. For example, as explained in the NPRM, if an employee was home 
sick or injured for 3 days, any certification would need to contain 
some information about the medical condition (such as that it was the 
flu or a badly sprained ankle) to verify that the condition existed and 
lasted 3 or more days, but if an employee was a patient in a hospital 
for 3 days, the certification would not need to specify the condition 
for which the employee was being treated, because he was clearly 
receiving care from a health care provider while using paid sick leave. 
No commenter suggested modification of this portion of the provision, 
and the Department adopts it as proposed.
    Proposed Sec.  13.5(e)(4) further required the contractor to use a 
human resources professional, a leave administrator, or a management 
official if making contact with the health care provider or other 
individual who created or signed the certification or documentation. 
This requirement was derived from a regulatory provision under the 
FMLA. See 29 CFR 825.307(a). The proposed text went on to prohibit the 
employee's direct supervisor from contacting the employee's health care 
provider unless there is no other appropriate individual who can do so. 
The proposed requirement was also based on a similar provision in the 
FMLA regulations, 29 CFR 825.307(a), but unlike that provision, it did 
not contain a complete prohibition on an employee's direct supervisor 
contacting the health care provider. In explaining this distinction, 
the Department noted that although the Department sought to protect the 
privacy of employees (who might not wish to share personal medical or 
other information with a supervisor) to the extent possible, it 
recognized that the Executive Order applies to contractors that are not 
covered by the FMLA because their businesses are not of the requisite 
size, and so it believed the limited proposed exception was necessary. 
EEAC commented that it was helpful for the Department to be clear about 
who is permitted to seek authentication or clarification. Roffman 
Horvitz, on the other hand, believed the proposed provision placed too 
many requirements on contractors and should instead describe the 
necessary training for seeking authentication or clarification and 
allow the contractor to select the person who would complete those 
tasks. The Department adopts this portion of the provision as proposed, 
noting in response to Roffman Horvitz that the regulatory language 
allows contractors significant leeway in determining who may contact 
the health care provider or other professional and the limits that it 
does create are necessary to protect employees' privacy.
    Proposed Sec.  13.5(e)(4) also addressed the Health Insurance 
Portability and Accountability Act (HIPAA) Privacy Rule, Pub. L. 104-
191, 110 Stat. 1936 (1996), which governs the privacy of individually 
identifiable health information created or held by HIPAA-covered 
entities and the requirements of which are set forth at 45 CFR parts 
160 and 164. Specifically, it provided that the HIPAA Privacy Rule 
requirements must be satisfied when individually identifiable health 
information of an employee is shared with a contractor by a HIPAA-
covered health care provider. As is true for purposes of the FMLA, if 
an employee's certification is unclear and the employee chooses not to 
provide the contractor with authorization allowing the contractor to 
clarify the certification with the health care provider (and does not 
otherwise clarify the certification), the proposed rule permitted the 
contractor to deny an employee's request to use paid sick leave. See 29 
CFR 825.307(a). The Department received no requests to change this 
language and adopts it as proposed.
    Proposed Sec.  13.5(f) addressed the interaction between the paid 
sick leave required by Executive Order 13706 and part 13 with other 
laws as well as contractors' paid time off policies. Proposed Sec.  
13.5(f)(1) implemented section 2(l) of the Executive Order by providing 
that nothing in the Order or part 13 excused noncompliance with or 
superseded any applicable Federal or State law, any applicable law or 
municipal ordinance, or a CBA requiring greater paid sick leave or 
leave rights than those established under the Executive Order and part 
13. The Department received no comments regarding this provision and 
adopts it as proposed.
    Proposed Sec.  13.5(f)(2) addressed the interaction between paid 
sick leave and the requirements of the SCA and DBA, thereby 
implementing section 2(f) of the Executive Order. Proposed Sec.  
13.5(f)(2)(i) explained that paid sick leave required by Executive 
Order 13706 and part 13 was in addition to a contractor's obligations 
under the SCA and DBA, and a contractor would not receive credit toward 
its prevailing wage or fringe benefit obligations under those Acts for 
any paid sick leave provided in satisfaction of the requirements of 
Executive Order 13706 and part 13. The SCA and DBA both provide that 
fringe benefits furnished to employees in compliance with their 
requirements do not include any benefits ``required by Federal, State, 
or local law.'' 41 U.S.C. 6703(2) (SCA); 40 U.S.C. 3141(2)(B) (DBA); 
see also 29 CFR 4.171(c) (``No benefit required by any other Federal 
law or by any State or local law, such as unemployment compensation, 
workers' compensation, or social security, is a fringe benefit for 
purposes of the [SCA].''); 29 CFR 5.29 (``The [DBA] excludes fringe 
benefits which a contractor or subcontractor is obligated to provide 
under other Federal, State, or local law. No credit may be taken under 
the [DBA] for the payments made for such benefits. For example, 
payment[s] for workmen's compensation insurance under either a 
compulsory or elective State statute are not considered payments for 
fringe benefits under the [DBA].''). Because paid sick leave provided 
in accordance with the Executive Order and part 13 is required by law, 
the Department reasoned, consistent with the Executive Order's express 
language, that such paid sick leave cannot count toward the fulfillment 
of SCA or DBA obligations.
    Proposed Sec.  13.5(f)(2)(ii) allowed a contractor to count the 
value of any paid sick time provided in excess of the requirements of 
Executive Order 13706 and part 13 (and any other law) toward its 
obligations under the SCA or DBA in keeping with the requirements of 
those Acts. In particular, the NPRM explained that a contractor could 
take credit for such paid sick time provided in compliance with the SCA 
requirements regarding fringe benefits as described in

[[Page 67643]]

29 CFR 4.170 through 4.177 or with the DBA requirements regarding 
fringe benefits as described in 29 CFR 5.20 through 5.32, as 
applicable.
    Several commenters disagreed with the Department's position as 
expressed in Sec.  13.5(f)(2). AGC commented that paid sick leave is a 
contractual, rather than legal, requirement and therefore should not be 
excluded from a contractor's fulfillment of its DBA fringe benefit 
obligations. ABC commented that not giving contractors credit toward 
their DBA obligations for the cost of providing paid sick leave amounts 
to imposing a double payment penalty on those contractors. PSC urged 
the Department to count a contractor's existing paid time off policy 
used to satisfy its obligations under the Order and part 13 (as 
permitted by Sec.  13.5(f)(5)) toward its SCA obligations. The Building 
Trades urged the Department to conclude that if a contractor provides 
paid sick leave in a manner sufficient for it to qualify as a ``bona 
fide fringe benefit'' for purposes of the SCA or DBA, that contractor 
should be permitted to take credit for irrevocable contributions to a 
paid sick leave plan toward its SCA or DBA obligations. The Department 
does not agree with these commenters' rationales or suggestions. Paid 
sick leave is required by Executive Order 13706 and part 13, which are 
sources of law, and therefore under the SCA and DBA, as well as the 
Order's own terms, it cannot be used to fulfill SCA or DBA obligations. 
That result applies regardless of how the contractor satisfies its 
obligations under the Order, including by doing so with a paid time off 
policy or with a funded plan (which, as newly explicitly noted in Sec.  
13.8, described below, is permitted). The Department does not believe 
it is inappropriate that DBA (or SCA) contractors will have to comply 
with two legal obligations: Fulfilling the requirements of the 
Executive Order, which provides employees access to paid sick leave, 
and fulfilling the requirements of the DBA (and SCA), which requires 
paying employees prevailing wages and fringe benefits. Accordingly, 
Sec.  13.5(f)(2) is adopted as proposed.
    The Department reiterates that to the extent contractors provide 
leave benefits in excess of those required by the Order and part 13, 
the value of the excess benefit (if not required under another law) may 
be counted toward SCA or DBA obligations. For example, if a contractor 
provides paid sick leave pursuant to the Order and part 13 but also 
voluntarily provides its employees an additional 16 hours of paid sick 
time, the value of that additional 16 hours may be counted toward its 
SCA or DBA obligations (to the extent permitted by those statutes and 
their implementing regulations). Or if a contractor's paid time off 
policy provides more than 56 hours of leave and a contractor tracks and 
records the amount of paid time off employees use for the purposes 
described in Sec.  13.5(c)(1), the contractor may count paid time off 
an employee uses for other purposes toward its SCA or DBA obligations 
(to the extent permitted by those statutes and their implementing 
regulations). For SCA-covered contracts, such obligations could include 
the required health and welfare benefit or required vacation time.
    The Chamber/IFA asked how paid sick time that is provided for in a 
CBA would be treated under section 4(c) of the SCA, 29 U.S.C. 6707(c), 
which generally requires that a successor contractor under the SCA may 
not pay service employees less than the wages and fringe benefits they 
would have received under a predecessor contractor's CBA. The response 
to this question will depend on the terms and circumstances of the paid 
leave provided for in the CBA, but will be determined based on two 
primary principles. First, ``a[n SCA] contractor may satisfy its fringe 
benefit obligations under any wage determination `by furnishing any 
equivalent combinations of fringe benefits or by making equivalent or 
differential payments in cash' in accordance with [SCA requirements].'' 
29 CFR 4.163(j). In other words, that a CBA provides for any particular 
benefit, such as paid time off, does not mean the successor contractor 
subject to a wage determination issued under section 4(c) must provide 
that same benefit. Second, benefits that are required by law, including 
paid sick leave required by the Executive Order and part 13, cannot 
count toward the fulfillment of SCA (or DBA) obligations.
    Proposed Sec.  13.5(f)(3) addressed the interaction of paid sick 
leave required by Executive Order 13706 and part 13 with the FMLA. It 
provided that a contractor's obligations under the Executive Order and 
part 13 would have no effect on its obligations to comply with, or 
ability to act pursuant to, the FMLA. It further provided that paid 
sick leave could be substituted for (that is, may run concurrently 
with) unpaid FMLA leave under the same conditions as other paid time 
off pursuant to 29 CFR 825.207. It also explained that as to time off 
that is designated as FMLA leave and for which an employee uses paid 
sick leave, all notices and certifications that satisfy the FMLA 
requirements set forth at 29 CFR 825.300 through 825.308 would satisfy 
the request for leave and certification requirements of Sec.  13.5(d) 
and (e).
    For example, although under the Executive Order and part 13 an 
employee's request to use paid sick leave need only be made at least 7 
days in advance if the need for leave is foreseeable, under the FMLA, 
such notice must be made at least 30 days in advance pursuant to 29 CFR 
825.302(a). If an employee seeks to use paid sick leave for an FMLA-
qualifying reason (and thus both types of leave will run concurrently), 
such as if she needs major surgery, the contractor may require that she 
comply with the FMLA's notice requirements, which will satisfy the 
requirements of the Executive Order and part 13; specifically, when she 
notifies the contractor of the date of her surgery (that is 30 days in 
the future or as soon as practicable) and likely recovery period, she 
will have complied with the requirements of Sec.  13.5(d) to provide 
oral or written notice of a need for leave that justifies the use of 
paid sick leave, and the expected duration of the leave, at least 7 
days in advance or as soon as practicable.
    Similarly, although under the Executive Order and part 13 a 
contractor may not require certification of the need to use paid sick 
leave unless the employee uses more than 3 consecutive full workdays of 
paid sick leave, a contractor is permitted to require certification 
from an employee for a shorter period of FMLA-designated leave as 
provided in 29 CFR 825.305. If an employee is concurrently using paid 
sick leave and FMLA leave, a contractor may require certification as 
permitted under the FMLA even if certification for paid sick leave 
would not be permitted under Executive Order 13706 and part 13 (such 
as, for example, if the employee only needed to use 1 day of leave). If 
that certification supported the use of FMLA leave for an employee's 
serious health condition, it would be more than sufficient to serve as 
the certification issued by a health care provider for use of 3 
consecutive full workdays of paid sick leave should such certification 
become necessary. Even if the certification was insufficient to 
demonstrate that an employee was entitled to use FMLA leave (such as 
because although the employee is ill, the illness did not meet the 
definition of a serious health condition), it could nevertheless be 
sufficient to meet the requirements of the Executive Order and part 13. 
The Department received no comments specific to the interaction of paid 
sick leave and FMLA leave and

[[Page 67644]]

therefore adopts this provision as proposed.
    EEAC asked the Department, presumably in response to the portion of 
this provision stating that paid sick leave can run concurrently with 
FMLA leave, to state that paid sick leave also runs concurrently with 
other types of paid leave. The Department has made clear in Sec.  
13.5(f)(4), discussed below, that for purposes of this rulemaking, a 
contractor can fulfill its obligation to provide paid sick leave under 
the Order and part 13 as well as satisfy the requirements of a State or 
local paid sick time law with one type of paid leave that complies with 
both the Order and such a law. Nothing in the regulations prohibits a 
contractor from fulfilling other legal obligations by providing leave 
that also satisfies its obligations under the Executive Order and part 
13. (The Department notes, however, that the converse is not 
necessarily true: Leave that satisfies a contractor's obligations under 
the Executive Order and part 13 may not necessarily satisfy or be used 
to satisfy other legal obligations, such as those arising under the SCA 
and DBA.)
    Proposed Sec.  13.5(f)(4) addressed the interaction of paid sick 
leave required by Executive Order 13706 and part 13 with paid sick time 
required by State or local law. As proposed, it explained that a 
contractor's compliance with a State or local law requiring that 
employees be provided with paid sick time does not excuse the 
contractor from compliance with its obligations under the Executive 
Order 13706 or part 13. It noted, however, that a contractor is 
permitted to satisfy its obligations under the Order and part 13 by 
providing paid sick time that fulfills the requirements of a State or 
local law provided that the paid sick time is accrued and could be used 
in a manner that meets or exceeds the requirements of the Order and 
part 13.
    The American Benefits Council, Seyfarth Shaw, the Chamber/IFA, and 
TrueBlue, Inc. asked that the Department provide that a contractor can 
fulfill its requirements under the Executive Order and part 13 by 
complying with any applicable State or local paid sick time law, 
emphasizing the burdens on contractors who would be required to comply 
with this Federal requirement in addition to State or local (or 
sometimes both) requirements. The Department declines to adopt this 
suggestion because it would often result in employees covered by a 
State or local paid sick time law having access to less paid sick time, 
or paid sick time that is available for fewer uses, than is required 
under the Executive Order. Furthermore, contractors have experience 
complying with a variety of Federal, State, and local laws, so although 
the Department recognizes that contractors operating in States and 
localities with paid sick time laws may have greater obligations than 
those operating elsewhere, this is not a situation unique to paid sick 
time or that is unduly burdensome.
    NWLC, the National Hispanic Council on Aging, the Maine Women's 
Lobby, UltraViolet Education Fund, and Innovation Ohio suggested that 
the Department provide more detail about the ways in which a contractor 
must satisfy the requirements of the Executive Order while also 
complying with a State or local paid sick time law, in particular by 
specifying that a contractor subject to both the Order and a State or 
local paid sick time law must provide leave that meets or exceeds the 
Order's accrual, use, and other requirements. The Department intended 
to make these points in the NPRM, and reiterates them here; it has also 
inserted language to this effect into the regulatory text--which is 
otherwise adopted as proposed--to be as clear as possible about 
contractors' obligations in jurisdictions in which a State or local 
paid sick time law applies.
    Specifically, as explained in the NPRM, a contractor whose 
employees perform work on or in connection with covered contracts in 
States, counties, or municipalities that have statutes or ordinances 
requiring that employees be provided with paid sick time must comply 
with both those laws and the Executive Order. But that contractor would 
be permitted, at least for purposes of the Executive Order and part 13, 
to fulfill both obligations simultaneously. If, for example, a State 
law requires that employees receive up to 40 hours of paid sick time, a 
contractor is not necessarily required to provide employees performing 
work on or in connection with covered contracts in that State an 
additional 56 hours of paid sick leave; if the contractor provides paid 
sick time in compliance with both the State law and the Executive Order 
and part 13, the contractor need only provide up to 56 hours total of 
paid sick leave. (The NYC Department of Consumer Affairs indicated in 
its comment that this example would apply to New York City's paid sick 
time ordinance.)
    The Department further explained in the NPRM that because the 
requirements of State and local laws and the Order and part 13 will 
rarely be identical, to satisfy both, a contractor will likely need to 
comply with the requirements that are more generous to employees. For 
example, a contractor could satisfy both a county law that requires 
employees to earn at least 1 hour of paid sick time for every 40 hours 
worked and the Executive Order by allowing employees to earn 1 hour of 
paid sick leave for every 30 hours worked. Or a contractor could 
satisfy both a State statute that allows employers to limit employees' 
use of paid sick time to 40 hours per year and the Executive Order by 
not limiting use per year on a basis other than the amount of leave an 
employee has available for use. Similarly, a contractor could satisfy 
both a municipal ordinance that does not permit an employer to require 
certification of the reason for using paid sick time under any 
circumstances and the Executive Order and part 13 by choosing not to 
require certification for the use of paid sick time even if an employee 
uses such leave for more than 3 consecutive days.
    Proposed Sec.  13.5(f)(5) addressed the interaction between the 
paid sick leave requirements of Executive Order 13706 and part 13 and 
an employer's paid time off policies, explaining first that the Order 
and part 13 need not have any effect on a contractor's voluntary paid 
time off policy, whether provided pursuant to a CBA or otherwise. The 
Department's proposal noted that whether as a practical matter the 
requirement to provide paid sick leave under the Order and part 13 
affects the amount or types of other leave a contractor provides or a 
union negotiates is not an issue within the Department's rulemaking 
authority. The Department received no comments specifically addressing 
this portion of the provision and adopts it as proposed, though it now 
appears as Sec.  13.5(f)(5)(i) because of adjustments to the provision 
described below. The timing of the Order's application to employees 
whose covered work is governed by a CBA is addressed in Sec.  13.4(f).
    Proposed Sec.  13.5(f)(5) also implemented section 2(g) of the 
Order by providing that a contractor's existing paid time off policy 
(if provided in addition to the fulfillment of SCA or DBA obligations, 
if applicable) would satisfy the requirements of the Executive Order 
and part 13 if various conditions were met. First, the proposed 
provision explained that the paid time off was to be made available to 
all employees described in Sec.  13.3(a)(2) (other than those excluded 
by Sec.  13.4(e)). Second, under the proposal, employees were to be 
permitted to use the paid time off for at least all of the purposes 
described in Sec.  13.5(c)(1). Those purposes, described in detail in 
the discussion of that provision, are those for which an employee must 
be permitted to use paid sick leave: (1) A physical or mental

[[Page 67645]]

illness, injury, or medical condition; (2) obtaining diagnosis, care, 
or preventive care from a health care provider; (3) caring for the 
employee's child, parent, spouse, domestic partner, or any other 
individual related by blood or affinity whose close association with 
the employee is the equivalent of a family relationship for the reasons 
detailed in the provision; or (4) domestic violence, sexual assault, or 
stalking, if the time absent from work is for the purposes detailed in 
the provision. Third, the paid time off was to be provided in a manner 
and an amount sufficient to comply with the rules and restrictions 
regarding the accrual of paid sick leave set forth in Sec.  13.5(a) and 
regarding maximum accrual, carryover, reinstatement, and payment for 
unused leave set forth in Sec.  13.5(b). Fourth, the paid time off was 
to be provided pursuant to policies sufficient to comply with the rules 
and restrictions regarding use of paid sick leave set forth in Sec.  
13.5(c), requests for leave set forth in Sec.  13.5(d), and 
certification and documentation set forth in Sec.  13.5(e), at least 
with respect to any paid time off used for the purposes described in 
Sec.  13.5(c)(1). Finally, the paid time off was to be protected by the 
prohibitions against interference, discrimination, and recordkeeping 
violations described in Sec.  13.6 and the prohibition against waiver 
of rights described in Sec.  13.7, at least with respect to any paid 
time off used for the purposes described in Sec.  13.5(c)(1).
    EEAC, the Chamber/IFA, the American Benefits Council, and PSC wrote 
that requiring contractors with paid time off policies to comply with 
the Executive Order's requirements is too burdensome, and that any paid 
time off policy that allows for 56 hours or more of leave should 
satisfy a contractor's obligations under the Order regardless of 
whether it meets the other requirements for accrual and use of paid 
sick leave specified in part 13. Some commenters identified specific 
requirements they found problematic: Seyfarth Shaw wrote that being 
unable to limit an employee's use of leave during an accrual year would 
be challenging for contractors and would lead many of them to abandon 
their existing paid time off policies; PSC asked that the recordkeeping 
requirements of part 13 not apply to paid time off policies; Delta 
wrote that the carryover requirement conflicted with its existing paid 
time off policy; and EEAC interpreted the Order to mean that any paid 
time off policy that complies with the terms of the Order, which it 
distinguished from what it asserted were additional requirements set 
forth in part 13, would satisfy a contractor's obligations. The 
Chamber/IFA and SHRM/CUPA-HR suggested that the Department identify the 
most crucial requirements of the Order and part 13 and permit 
contractors with paid time off policies to comply only with those. 
SHRM/CUPA-HR also asked for clarification of whether if an employee 
uses all of her paid time off for purposes other than those the Order 
specifies (such as vacation), the contractor is obligated to provide 
additional paid sick leave to that employee.
    After careful consideration of these comments, the Department 
declines to adopt the commenters' suggestions that contractors with 
paid time off policies that provide employees with less than is 
required by this rulemaking be excused from complying with the 
requirements described in the Order and part 13. The Department 
believes the best interpretation of section 2(g) of the Order is that 
it allows contractors that already provide paid time off under policies 
that are equivalent to or more generous than those described in the 
Order and part 13 to avoid an obligation to provide an additional 56 
hours of paid sick leave. Thus, employers who make available to 
employees entitled to paid sick leave pursuant to the Executive Order 
56 hours of paid time off under policies that are equivalent to or more 
generous than those described in the Order and part 13 have fulfilled 
their obligations, regardless of whether their employees use that paid 
leave for the purposes designated by the Order or for other purposes 
deemed permissible by their employers, such as vacation. The key to 
compliance with the Order and part 13 is that employers with paid time 
off policies provide access to no less than 56 hours of paid leave 
under the required conditions, and that any such leave used for the 
purposes described in Sec.  13.5(c)(1) is covered by the relevant 
protections form part 13, not whether employees choose to use their 
paid time off for the purposes covered by the Order and part 13. In 
this way, the Order and part 13 maintain the flexibility and discretion 
that many employers and employees value in paid time off policies.
    This flexibility and discretion, however, should not be understood 
to excuse contractors that provide paid time off that is not equally 
protective of employees' access to paid absences for the reasons 
described in Sec.  13.5(c)(1) from fulfilling the requirements of the 
Order and part 13. For example, if a contractor offered a paid time off 
policy under which each employee had 7 days of paid leave he could use 
for any purpose but an employee was required to use a full day of leave 
at a time even if he only needed to be absent for an hour to go to a 
doctor's appointment, or if the contractor could deny a request to use 
leave for any reason, including if the office is busy at the time an 
employee's child is sick, that contractor's employees would not have 
the meaningful access to paid sick leave the Order and part 13 are 
meant to confer and therefore the Department is not adopting 
commenters' suggestion that such a policy would fulfill the 
contractor's obligations under the Order.
    With respect to EEAC's interpretation that the Order requires paid 
time off policies to comply with the Order itself but not what it 
considers to be additional regulatory requirements (such as 
recordkeeping requirements, the requirement to notify employees of the 
amount of paid sick leave they have accrued, the requirement to 
establish an accrual year, or the requirement not to make impermissible 
deductions from the pay and benefits an employee receives when using 
paid sick leave), the Department disagrees with the commenter's 
premise. The Order contemplates that regulations will be integral to 
carrying out its purposes, and accordingly directs the Secretary to 
issue regulations that are necessary and appropriate to implement the 
Order. 80 FR 54698. Part 13 constitutes the Department's interpretation 
of what the Order requires and how contractors will comply with it; 
each regulatory provision, rather than being an extraneous or 
additional requirement beyond what the Order demands, is a necessary 
and appropriate part of a complete scheme to give the Order its full 
intended effect. For example, the Order specifically authorizes the 
Secretary to include in its implementing regulations requirements 
regarding recordkeeping, and the records part 13 requires contractors 
to make and maintain will be essential to any WHD investigation of a 
possible violation of the Order. In addition, the Order refers to paid 
sick leave accrual in the course of a year without defining ``year''; 
the definition of and requirements regarding establishing an ``accrual 
year'' give contractors the information and instructions they need to 
comply with their obligations.
    The Department is therefore adopting Sec.  13.5(f)(5) with the 
language proposed, which now appears as Sec.  13.5(f)(5)(ii), but it is 
also clarifying, as Sec.  13.5(f)(5)(iii) and as discussed here, how 
its provisions apply if a contractor's paid time off policy provides 
more than 56 hours of leave each year. The Department recognizes that 
(1)

[[Page 67646]]

employers often provide paid time off rather than separate vacation and 
sick leave because they and their employees value the flexibility 
inherent in not distinguishing types of leave and (2) the intent of the 
Order was to ensure that employees have access to up to 56 hours of 
paid leave for the purposes described in Sec.  13.5(c)(1). Therefore, 
the regulatory text now explicitly provides that a contractor 
satisfying the requirements of the Executive Order and part 13 with a 
paid time off policy that provides more than 56 hours of leave per 
accrual year may choose to either (1) provide all paid time off as 
described in Sec.  13.5(f)(5)(ii) or (2) track, and make and maintain 
records reflecting, the amount of paid time off an employee uses for 
the purposes described in Sec.  13.5(c)(1), in which case the 
contractor need only provide, for each accrual year, up to 56 hours of 
paid time off the employee requests to use for such purposes in 
compliance with the Order and part 13.
    In other words, to ensure that 56 hours of paid time off is 
protected under the Order, if a contractor chooses to track, and make 
and maintain records reflecting, the amount of paid time off an 
employee uses for the purposes described in Sec.  13.5(c)(1), the 
contractor need only provide, for each accrual year, up to 56 hours 
that an employee requests to use for such purposes in compliance with 
the rules and requirements of the Executive Order and part 13. If a 
contractor does not choose to track, and make and maintain records 
reflecting, the amount of paid time off an employee uses for the 
purposes described in Sec.  13.5(c)(1), all of an employee's requests 
to use paid time off for such purposes must be provided in compliance 
with the Order and part 13. Regardless of whether a contractor 
distinguishes between paid time off used for the purposes described in 
Sec.  13.5(c)(1) and paid time off used for other purposes, the 
contractor is not required to provide any additional paid sick leave or 
paid time off beyond the amount provided by the contractor's paid time 
off policy that satisfies the conditions described in Sec.  13.5(f)(5).
    For example, assume a contractor provides 120 hours of paid time 
off per accrual year. That contractor could decide to track and record 
the amount of paid time off each employee uses for the purposes 
described in Sec.  13.5(c)(1), meaning that it formally distinguishes 
between leave used for such purposes and for other purposes and 
maintains documentation designed to ensure that it and each of its 
employees know how much paid time off an employee has used for the 
purposes described in Sec.  13.5(c)(1) (and therefore how many out of 
at least 56 hours per accrual year the employee has remaining for use 
subject to the protections of the Order and part 13). If the contractor 
made such a choice, an employee who uses 56 hours for the purposes 
described in Sec.  13.5(c)(1) early in the accrual year would not be 
entitled to Order's protections for her remaining 64 hours of paid time 
off regardless of the purposes for which she requests to use them. On 
the other hand, an employee who uses 64 hours of paid time off for 
other purposes (such as vacation) early in the year would still be 
entitled to use any or all of her remaining 56 hours of leave for such 
purposes subject to all of the protections required by the Order and 
part 13. Under this approach, a contractor must make up to 56 hours of 
paid time off per accrual year available for an employee's use for the 
purposes described in Sec.  13.5(c)(1), but an employee might not 
choose to use any or all of her leave in that manner. For example, an 
employee who uses 80 hours of paid time off for vacation early in the 
year would only be entitled to use up to 40 remaining hours of leave 
for the purposes described in Sec.  13.5(c)(1) subject to the 
protections required by the Order and part 13, and if she used those 40 
hours for another vacation, she would have no paid leave remaining that 
her contractor would be obligated to provide for the purposes described 
in Sec.  13.5(c)(1).
    If a contractor that provides 120 hours of paid time off chooses 
not to track and record the amount of paid time off employees use for 
the purposes described in Sec.  13.5(c)(1), its obligations would 
differ because it would not have information to demonstrate that an 
employee had in fact used her full entitlement to up to 56 hours of 
paid leave for the purposes described in Sec.  13.5(c)(1). For example, 
if one of the contractor's employees uses 56 hours of leave early in 
the accrual year for reasons that the contractor did not document (even 
if the contractor was informally aware of those reasons), the employee 
would still be entitled to use any or all of her 64 remaining hours of 
paid time off for the purposes described in Sec.  13.5(c)(1) subject to 
the protections of the Order and part 13.
    As these examples demonstrate, whether a contractor chooses to keep 
track of the purposes for which paid time off is used determines 
whether it may limit the amount of paid time off as to which it must, 
if the leave is used for a purpose described in Sec.  13.5(c)(1), 
provide all of the protections of the Order and part 13. But whichever 
option the contractor selects, it need not provide more paid time off 
than it offers in its policy (in this example, 120 hours) per accrual 
year irrespective of the purposes for which an employee actually uses 
her leave.
    Accordingly, Sec.  13.5(f)(5) as adopted still provides that a 
contractor's paid time off policy must in significant measure comply 
with the requirements of the Order and part 13, but the Department 
clarifies that contractors who fulfill their obligations under the 
Order and part 13 with a paid time off policy have both the option to 
formally distinguish between uses of leave and other flexibilities as 
described below. The following discussion offers details regarding how 
a paid time off policy used to fulfill a contractor's obligations under 
the Order and part 13 could operate.
    As noted in the regulatory text and above, to satisfy the 
obligations of the Order and part 13, a contractor's paid time off 
policy must comply with all of the requirements of Sec. Sec.  13.5(a) 
and 13.5(b) or, if the contractor chooses to track and record the 
amount of paid time off employees use for the purposes described in 
Sec.  13.5(c)(1), the contractor must comply with those provisions with 
respect to up to 56 hours per accrual year of paid time off an employee 
requests to use for such purposes. The accrual-related requirements of 
the Executive Order and part 13 with which a contractor's paid time off 
policy must comply include allowing employees to accrue at least 1 hour 
of leave for every 30 hours worked (as hours worked are defined for 
purposes of the FLSA) without limiting annual accrual at any less than 
56 hours and providing leave that accrues at least each pay period or 
each month as under Sec.  13.5(a)(1)(ii). A contractor may assume for 
purposes of accrual of leave under its paid time off policy that 
employees whose hours it is not otherwise required by statute to track 
work 40 hours per week as described in Sec.  13.5(a)(1)(iii). A 
contractor also has the option of providing employees with at least 56 
hours of paid time off at the beginning of each accrual year as 
described in Sec.  13.5(a)(3).
    A contractor may choose to fulfill its obligations pursuant to 
Sec.  13.5(f)(5) with a paid time off policy that provides more leave 
than is required, either by allowing for more rapid accrual (for 
example, by providing employees who work 80 hours in a pay period with 
4 hours of paid time off for each pay period) or by providing more than 
56 hours of paid time off at the beginning of each year. It is in these 
circumstances that the contractor's choice to track and record the 
reasons for which employees

[[Page 67647]]

use leave becomes relevant, as noted throughout this discussion.
    The requirement in Sec.  13.5(a)(2) that a contractor notify 
employees of the amount of paid sick leave they have accrued also 
applies to paid time off policies that fulfill a contractor's 
obligations under the Order and part 13. In a circumstance in which a 
contractor does not track and record which paid time off an employee 
uses for the purposes described in Sec.  13.5(c)(1), the contractor 
would comply with this requirement by informing an employee of an 
amount of paid time off generally, rather than paid sick leave 
specifically, available for use. In other words, because paid sick 
leave is typically not designated separately when an employer offers a 
paid time off policy, in this context, a contractor need only provide 
notice of the amount of paid time off an employee has available for use 
no less than once each pay period or each month (whichever interval is 
shorter) as well as upon a separation from employment and upon any 
reinstatement of leave if an employee is rehired within 12 months. If, 
however, a contractor chooses to track and record paid time off used 
for the purposes described in Sec.  13.5(c)(1), the contractor would 
comply with this requirement by informing an employee of the amount of 
paid time off available for use for those purposes with the full 
protections required by the Order and part 13. A contractor would be 
free to follow its usual policy for informing employees of how much 
paid time off they have available overall if that amount differs (or to 
adopt any other practice it wished with respect to that time).
    Additionally, a paid time off policy used to fulfill a contractor's 
obligations under the Order and part 13 must allow carryover of leave 
from the previous accrual year as provided in Sec.  13.5(b)(2). But a 
contractor need only allow carryover of up to 56 hours of paid time off 
even if its policy provides more than 56 hours of leave, although this 
requirement applies differently depending on whether a contractor 
chooses to track and record the amount of paid sick leave an employee 
uses for the purposes described in Sec.  13.5(c)(1). For example, 
assume that under a particular contractor's paid time off policy, 
employees who regularly work 8-hours days, 5 days per week accrue a 
half day of paid time off each semi-monthly pay period, so they receive 
12 days total per year, and the contractor does not track and record 
the reason the employee uses paid time off. If one employee used all 12 
days in year 1 (for vacation, the purposes described in Sec.  
13.5(c)(1), or some combination of both), she would not carry over any 
paid time off into year 2. If another employee used 7 days in year 1 
(for any purpose), a contractor would be required to permit her to 
carry over her remaining 5 days into year 2. If a third employee used 
no paid time off in year 1, however, the contractor would only be 
required to allow her to carry over 7 of her 12 days into year 2. 
(Consistent with Sec.  13.5(b)(3), a contractor may choose to limit an 
employee's additional accrual in year 2 until she has less than 7 days 
of paid time off available.)
    If instead a contractor had a paid time off policy with the same 
accrual practices but the contractor did choose to track and record 
which leave employees used for the purposes described in Sec.  
13.5(c)(1), application of the carryover requirement would in some 
circumstances depend on how much leave each employee had so used. If an 
employee used all 12 days in year 1 (in this case, regardless of 
whether she used it all for vacation or used some for vacation and some 
for the purposes described in Sec.  13.5(c)(1)), she would not carry 
over any paid time off into year 2. If another employee used 7 days in 
year 1 for vacation, the contractor would be required to permit her to 
carry over her remaining 5 days into year 2 (and to use as much of 
those 40 hours, in addition to as much of 56 additional hours accrued 
in year 2, as she requested during year 2 for the purposes described in 
Sec.  13.5(c)(1)). But if the employee used 7 days of paid time off 
because she was sick, the contractor would not be required to permit 
her to carry over any remaining paid time off into year 2. If instead 
the employee had used 5 days because she was sick and 2 days for 
vacation, the contractor would only be required to permit her to carry 
over 2 of her remaining 5 days of paid time off into year 2 (and to use 
as much of those 16 hours, in addition to as much of 56 additional 
hours accrued in year 2, as she requested during year 2 for the 
purposes described in Sec.  13.5(c)(1)). If a third employee used no 
paid time off in year 1, the contractor would be required to allow her 
to carry over 7 of her 12 days into year 2. (Consistent with Sec.  
13.5(b)(3), the contractor would be permitted to limit an employee's 
additional accrual in year 2 until she had less than 7 days of paid 
time off available to use for the purposes described in Sec.  
13.5(c)(1).)
    If a contractor's paid time off policy provides leave at the 
beginning of each year rather than allowing employees to accrue it over 
time (as is permitted under Sec.  13.5(a)(3)), employees still need 
only begin the subsequent year with as much leave as would have been 
required under the Order and part 13. Under Sec.  13.5(a)(3), if a 
contractor provides 56 hours of paid sick leave at the beginning of the 
accrual year, an employee must receive 56 additional hours of paid sick 
leave even if he has carried over some paid sick leave from the 
previous accrual year. In practice, these requirements mean that an 
employee of a contractor who has chosen the Sec.  13.5(a)(3) option 
could begin accrual years after the first year with as much as 112 
hours of paid sick leave. Accordingly, if a contractor provides 
employees with 10 days of paid time off at the beginning of each year, 
employees who use all of their leave (regardless of the purposes for 
which the leave is used or whether the contractor tracks and records 
such purposes) may begin subsequent years with only 10 days, but those 
who have not used all of their leave must be permitted either to carry 
over up to 4 days of unused paid time off (even if they have more) such 
that they begin the year with up to 14 days (that is, 112 hours) of 
leave or, if a contractor tracks and records leave used for the 
purposes described in Sec.  13.5(c)(1), as much paid time off as is 
unused and required to be available for such purposes (because the 
employee has used less than any amount carried over plus up to 56 newly 
accrued hours for such purposes). Alternatively, if an employee begins 
new accrual years with 112 hours or more of paid time off, whether he 
has carried over some of that time from the previous year or has 
received new leave at or above that amount, the Department would 
consider a contractor to have met its carryover obligation. In such 
circumstances, a contractor that tracks and records the amount of paid 
time off employees use for the purposes described in Sec.  13.5(c)(1) 
must permit employees to use up to 112 hours of paid time off for such 
purposes in compliance with the requirements of the Order and part 13 
in accrual years after the first, consistent with Sec.  13.5(a)(3).
    Paid time off policies used to satisfy the requirements of the 
Order and part 13 pursuant to Sec.  13.5(f)(5) must also comply with 
the requirement to reinstate leave for an employee rehired by the same 
contractor within 12 months of a job separation. As with carryover, 
however, only up to 56 hours of paid time off must be reinstated even 
if employees have greater amounts of leave upon separation. The precise 
amount will depend upon how much paid time off an employee has 
remaining and, if a contractor tracks and records the amount of paid 
time off used for the purposes described in

[[Page 67648]]

Sec.  13.5(c)(1), how much of that time the contractor must permit an 
employee to use for such purposes based on the employee's prior use in 
that accrual year. Because the Department has modified Sec.  13.5(b)(5) 
to provide that if a contractor pays separating employees for unused 
paid sick leave, no reinstatement of the leave is required, the same 
relief from the obligation could apply to paid time off policies.
    Under Sec.  13.5(f)(5), a contractor may only use its paid time off 
policy to satisfy its obligations under the Order and part 13 if, when 
an employee seeks to use or does use leave for the purposes described 
in Sec.  13.5(c)(1) (all of which must be permissible uses of the paid 
time off), the request and use of the leave comply with all of the 
requirements of Sec. Sec.  13.5(c), (d), (e), Sec.  13.6, and Sec.  
13.7. These requirements apply to all paid time off used for the 
purposes described in Sec.  13.5(c)(1) regardless of whether the 
contractor tracks and records such time.
    The following examples illustrate how a contractor may treat paid 
time off used for different purposes differently and the implications 
of a contractor's choice to track and record the use of paid time off 
for the purposes described in Sec.  13.5(c)(1).
    When paid time off is used for a purpose described in Sec.  
13.5(c)(1), employees must be permitted to use leave in increments of 
no greater than 1 hour. A contractor may, however, require employees 
using paid time off for other reasons (such as vacation) to use paid 
time off in larger increments, such as half or full days. Therefore, if 
an employee asked to come to work 2 hours late one day so he could 
attend an event at his daughter's school, a contractor could require 
the employee to take the entire day off; if the employee asked to come 
to work 2 hours late because he needed to take his daughter to see her 
pediatrician, however, the contractor would have to permit the employee 
to use only 2 hours of paid time off.
    If that contractor's paid time off policy provides 10 days of leave 
each year, and the employee had already used 7 (8-hour) days of paid 
time off that year to be absent from work because his daughter was 
sick, the contractor's obligation to comply with the requirements of 
Sec. Sec.  13.5(c), (d), (e), Sec.  13.6, and Sec.  13.7 with respect 
to the employee's additional request to take his daughter to the 
pediatrician would depend upon how the contractor managed its paid time 
off policy. Specifically, if the contractor chose not to track and 
record the reasons for which an employee had used paid time off, it 
would be required to approve the employee's request to use only 2 hours 
of paid time off. But if the contractor had kept a record noting that 
the employee's previous requests to use paid time off were for a 
purpose described in Sec.  13.5(c)(1) (in this case, caring for his 
daughter when she was ill), it would have already fulfilled its 
obligations under the Order and this part and would be free to require 
that the employee use a full day of leave. Furthermore, if the employee 
had already used all 10 days of paid time off, regardless of the reason 
for his absences or whether the contractor tracked those reasons, the 
contractor would be free to deny the employee's request for 2 
additional hours of paid leave. As another example of how a contractor 
can treat paid time off used for different purposes differently, a 
contractor would be obligated not to make the use of paid time off 
requested for a purpose described in Sec.  13.5(c)(1) contingent on 
finding a replacement worker or fulfilling operational needs, although 
it would be free to deny requests for vacation for those reasons.
    The Department noted in the discussion of Sec.  13.5(f)(5) in the 
NPRM that a paid time off policy used to satisfy a contractor's 
obligations under the Order and part 13 may not set limits on the 
amount of leave that may be used per year or at once; in the Final 
Rule, this requirement in Sec.  13.5(c)(4) is clarified to make 
explicit that use may be limited by the amount of paid sick leave an 
employee has available. The Department similarly clarifies here that 
compliance with this requirement in the context of a paid time off 
policy involves either not limiting use per year, at least for the 
purposes described in Sec.  13.5(c)(1), to an amount of leave less than 
the total amount an employee has accrued under the contractor's policy, 
or not limiting use per year to less than 56 hours of leave (or any 
amount of leave carried over plus up to 56 hours of paid time off newly 
accrued in the accrual year) for the purposes described in Sec.  
13.5(c)(1), subject to the amount of paid time off an employee has 
remaining, if the contractor tracks and records such use and chooses to 
limit leave for such purposes.
    For instance, if a contractor's policy provided employees with 120 
hours of leave per year to use for any purpose and the contractor did 
not track the purposes for which employees used leave, a contractor 
could limit use per year to 120 hours. For example, the contractor 
could permissibly deny an employee's request to use paid time off to 
care for his frail grandmother after the employee had used all 120 
hours in that year (for vacation or any other purpose). By contrast, a 
contractor that does track and record the reasons an employee uses paid 
time off could, for example, deny an employee's request to use paid 
time off to meet with a counselor regarding domestic violence after an 
employee (who did not carry over any leave from the previous accrual 
year) had already used 56 hours of paid time off for that reason even 
though the employee had additional, unused hours of paid time off that 
year. That contractor could also deny that request if the employee had 
already used all of her paid time off for the year, even if she had 
only used 10 hours for purposes described in Sec.  13.5(c)(1) and the 
rest for vacation.
    As noted above, a contractor using its paid time off policy to 
satisfy its obligations under the Order and part 13 must comply with 
all of the requirements of Sec.  13.5(d) (which addresses employee 
requests to use paid sick leave and contractors' responses to such 
requests) with respect to leave used for any purpose described in Sec.  
13.5(c)(1) (or to the amount of such leave as to which the contractor 
must comply with the Order and part 13, if the contractor tracks and 
records leave used for the purposes described in Sec.  13.5(c)(1)). For 
example, consistent with that provision, a contractor may not require 
employees to make requests for leave (at least when used for a purpose 
described in Sec.  13.5(c)(1) and if the contractor is required to 
comply with the Order and part 13 with respect to the leave) more than 
7 days in advance of the need or as soon as is practicable if the need 
for leave is not foreseeable. In addition, under a paid time off policy 
used to fulfill a contractor's obligations under the Order and part 13 
pursuant to Sec.  13.5(f)(5), a contractor's denial of a request to 
take leave, at least when requested for the purposes required under 
Sec.  13.5(c)(1) and if the contractor is required to comply with the 
Order and part 13 with respect to the leave, must be explained in 
writing that is in accordance with the permissible reasons for denial 
under part 13.
    Contractors have the option of complying with these and other 
provisions of Sec.  13.5(c) and (d) (and (e), and Sec. Sec.  13.6 and 
13.7) as to all paid time off or distinguishing between leave used for 
the purposes described in Sec.  13.5(c)(1) and other purposes (such as 
vacation time) even if they do not choose to track and record the 
amount of time used for the purposes described in Sec.  13.5(c)(1). For 
example, a contractor could approve any requests to use paid time off 
made at least 7 days in advance

[[Page 67649]]

if foreseeable, or as soon as practicable if not foreseeable, 
regardless of the reason for the absence, or a contractor could require 
requests to use paid time off for vacation to be made 30 days in 
advance but allow requests to use paid time off for illness (as well as 
the other uses of paid sick leave described in Sec.  13.5(c)(1)) to be 
made no more than 7 days in advance if foreseeable or as soon as 
practicable if not foreseeable.
    The rules regarding certification or documentation of the reason 
for an absence of 3 or more full consecutive days in Sec.  13.5(e) are 
also applicable to a paid time off policy used to satisfy the 
requirements of the Order and part 13, at least with respect to paid 
time off used for the purposes required by Sec.  13.5(c)(1). If the 
contractor tracks and records the amount of leave used for the purposes 
described in Sec.  13.5(c)(1), however, it would be required to comply 
with Sec.  13.5(e) with respect to paid time off an employee uses for 
the purposes described in Sec.  13.5(c)(1) only to the extent such 
leave is within the amount of leave as to which the contractor must 
comply with the Order and part 13 (that is, up to 56 hours in the first 
accrual year and up to any amount carried over plus 56 hours in 
subsequent accrual years). If a contractor's paid time off policy 
allows the use of leave for a broad range of purposes, that contractor 
might never require such certification or documentation, in which case 
there would be no conflict with Sec.  13.5(e). Similarly, although the 
recordkeeping requirements of part 13 apply to contractors who fulfill 
their obligations under the Order with paid time off policies, to the 
extent the contractor does not deny requests for leave or require 
certification or documentation to justify the use of leave, no such 
records will exist or, therefore, need to be maintained.
    As noted in the NPRM, a contractor may only use its paid time off 
policy to satisfy its obligations under the Order and part 13 if, at 
least when an employee seeks to use or does use leave for the purposes 
described in Sec.  13.5(c)(1) and if the contractor (that tracks and 
records the amount of leave used for the purposes described in Sec.  
13.5(c)(1)) is required to comply with the Order and part 13 with 
respect to the leave, that leave is treated as protected by the 
prohibitions on interference and discrimination as required by Sec.  
13.6, meaning that, for example, the request for or use of leave could 
not be used as a negative factor in any hiring or promotion decision 
and could not be the basis for discipline, including by being counted 
in a no fault attendance policy.
    The Department notes that the option to track and record time as 
described in this discussion is not reflected in the recordkeeping 
requirements set forth in Sec.  13.25 because making and maintaining 
documentation of the purposes for which employees use paid time off is 
a choice rather than an obligation. If, however, a contractor wishes to 
limit the amount of paid time off employees may use for the purposes 
described in Sec.  13.5(c)(1))--and, more significantly, as to which it 
must comply with the Order and part 13--the burden is on the contractor 
to create and keep adequate documentation showing that it has in fact 
allowed an employee to receive the required benefits such that it is 
subsequently permitted to deny an employee of them. No particular form 
of documentation is required; a contractor may develop any system for 
tracking when paid time off is used for a purpose described in Sec.  
13.5(c)(1) it chooses as long as the contractor has accurate records 
(that could be reviewed during a WHD investigation) and employees are 
properly notified of the amount of paid time off they have available 
for such purposes.
    The Department reiterates that a contractor has a choice between 
amending an existing paid time off policy to operate as described here 
or instead providing paid sick leave that is separate from its more 
general leave policy. For example, if a contractor does not permit an 
employee to use paid time off for the purposes described in Sec.  
13.5(c)(1)(iv) related to domestic violence, sexual assault, or 
stalking, its paid time off policy would not satisfy its obligations 
under the Executive Order and part 13 as provided in Sec.  13.5(f)(5). 
Accordingly, the contractor could choose to amend its paid time off 
policy to permit leave for these additional purposes or could provide 
paid sick leave pursuant to the Order and part 13 in addition to paid 
time off. Similarly, if a contractor's policy allowed the contractor to 
deny an employee's request for leave to be used for one of the purposes 
described in Sec.  13.5(c)(1) based on operational needs, that policy 
would not satisfy the contractor's obligations under the Executive 
Order and part 13, and the contractor could either adjust its policy or 
distinguish between paid sick leave (which it would provide in keeping 
with the requirements of the Order and part 13) and other types of paid 
time off it provides (which it could provide in any manner it wishes, 
so long as it complies with any other applicable laws). And if a 
contractor with a paid time off policy that provides more than 56 hours 
of paid time off does not wish to comply with the requirements of the 
Order and part 13 as described with respect to all of the leave its 
policy allows or to track and record the amount of leave used for the 
purposes described in Sec.  13.5(c)(1), it can instead provide paid 
sick leave separately from paid time off.
    Finally, as noted in the NPRM, although a contractor need not treat 
vacation or other uses of leave under its paid time off policy 
identically to the way it treats paid sick leave, the Department will 
consider any aspects of a paid time off policy that create significant 
barriers to an employee's using the time for the purposes described in 
Sec.  13.5(c)(1) as interference with the employee's accrual or use 
under the Order or part 13 in violation of Sec.  13.6(a) or, if 
appropriate, as discrimination in violation of Sec.  13.6(b), meaning 
that the paid time off policy would not satisfy the contractor's 
obligations under the Order and part 13. For example, although a 
contractor need not allow vacation time to be taken in 1-hour 
increments, a contractor would not be in compliance with Sec.  13.6(a) 
if it were to require employees to use all of the time provided in its 
paid time off policy at once should the employee ask to take vacation, 
such that any employee who took any vacation in an accrual year would 
automatically have no paid time off remaining for the purposes 
described in Sec.  13.5(c)(1). (This example does not imply that an 
employee cannot choose to use all of her paid time off for vacation 
such that she has no paid leave remaining in the event a need to be 
absent from work for one of the reasons described in Sec.  13.5(c)(1) 
arises; it signifies only that a contractor cannot deliberately make it 
difficult to make a different choice.) Similarly, a contractor's paid 
time off policy would not comply with Sec.  13.6(a) if the contractor 
required employees to request leave for vacation 1 month in advance and 
would not allow an employee who had scheduled such leave and who 
became, or had a family member who became, unexpectedly ill to instead 
use paid time off for that purpose (and cancel the other upcoming 
leave, or take it as unpaid leave).
Section 13.6 Prohibited Acts
    Proposed Sec.  13.6 described and prohibited acts that constitute 
violations of the requirements of Executive Order 13706 and part 13.
    Proposed Sec.  13.6(a)(1) prohibited a contractor from interfering 
with an employee's accrual or use of paid sick leave as required by 
Executive Order 13706 or part 13. Proposed Sec.  13.6(a)(2)

[[Page 67650]]

included a non-exclusive list of examples of interference. The first 
example was miscalculating the amount of paid sick leave an employee 
has accrued, such as if a contractor does not include all of an 
employee's hours worked in calculating accrual. A second was denying or 
unreasonably delaying a response to a proper request to use paid sick 
leave, such as if a contractor denies a request to use paid sick leave 
for an appointment with a clinical social worker because the contractor 
mistakenly believes a clinical social worker is not a health care 
provider, or if a contractor denies a request to use paid sick leave to 
accompany the employee's sister to a court proceeding regarding 
stalking because the contractor does not believe an employee can use 
paid sick leave for a family member's legal proceeding related to 
stalking, or if a contractor does not respond to an employee's timely 
request for paid sick leave until after the need for leave has passed 
(provided the request was made sufficiently in advance of the need).
    In addition, the Department explained that as proposed, 
interference included discouraging an employee from using paid sick 
leave or reducing an employee's accrued paid sick leave by more than 
the amount of such leave used. Transferring the employee to work on 
non-covered contracts to prevent the accrual or use of paid sick leave, 
including scheduling an employee's non-covered work to fall at the time 
for which the employee has requested to use paid sick leave for the 
purpose of avoiding approving the request (rather than for a lawful 
reason, such as for a legitimate business purpose), would also 
constitute interference. Finally, under the NPRM, interference also 
included disclosing confidential information received in certification 
or other documentation provided to verify the need to use paid sick 
leave or making the use of paid sick leave contingent on the employee's 
finding a replacement worker or the fulfillment of the contractor's 
operational needs.
    Proposed Sec.  13.6(b) was an anti-discrimination provision 
implementing section 2(k) of Executive Order 13706. Proposed Sec.  
13.6(b)(1) prohibited a contractor from discharging or in any other 
manner discriminating against an employee for: (i) Using, or attempting 
to use, paid sick leave as provided for under Executive Order 13706 and 
part 13; (ii) filing any complaint, initiating any proceeding, or 
otherwise asserting any right or claim under Executive Order 13706 and 
part 13; (iii) cooperating in any investigation or testifying in any 
proceeding under Executive Order 13706 and part 13; or (iv) informing 
any other person about his or her rights under Executive Order 13706 
and part 13.
    Proposed Sec.  13.6(b)(2) addressed what constitutes 
discrimination, a term the Department intended to be understood 
broadly, by noting that discrimination included, but was not limited 
to, a contractor's considering any of the activities described in Sec.  
13.6(b)(1) as a negative factor in employment actions, such as hiring, 
promotions, or disciplinary actions, or a contractor's counting paid 
sick leave under a no fault attendance policy. See 29 CFR 825.220(c) 
(analogous provision under FMLA regulations). Under this proposed 
provision, a contractor could not, for example, reassign an employee to 
fewer or less preferable shifts, to a less well paid position, or to a 
non-covered contract because he used paid sick leave. The proposed 
provision also prohibited a contractor, in deciding whether to hire an 
employee to work on or in connection with a covered contract, to 
consider as a factor that the contractor would be required to reinstate 
the employee's unused paid sick leave from prior covered work pursuant 
to Sec.  13.5(b)(4).
    In the NPRM, the Department noted that this proposed provision 
would serve the important purpose of ensuring effective enforcement of 
the Executive Order, which will depend on complaints from employees, 
and reiterated several interpretations of the provision it had 
discussed in the Minimum Wage Executive Order rulemaking in connection 
with a comparable anti-discrimination provision. 79 FR 60666-67. First, 
consistent with the Supreme Court's interpretation of the FLSA's anti-
retaliation provision, Sec.  13.6(b) would protect employees who file 
oral as well as written complaints. See Kasten v. Saint-Gobain 
Performance Plastics Corp., 131 S. Ct. 1325, 1336 (2011). Furthermore, 
as under the FLSA, the anti-discrimination provision under part 13 
would protect employees who complain to the Department as well as those 
who complain internally to their employers about alleged violations of 
the Order or part 13. See, e.g., Minor v. Bostwick Laboratories, 669 
F.3d 428, 438 (4th Cir. 2012); Hagan v. Echostar Satellite, LLC, 529 
F.3d 617, 626 (5th Cir. 2008); Lambert v. Ackerley, 180 F.3d 997, 1008 
(9th Cir. 1999) (en banc); Valerio v. Putnam Associates, 173 F.3d 35, 
43 (1st Cir. 1999); EEOC v. Romeo Community Sch., 976 F.2d 985, 989 
(6th Cir. 1992).
    The Department further noted in the NPRM that the anti-
discrimination provision would apply in situations where there is no 
current employment relationship between the parties; for example, it 
would protect from retaliation by a prospective or former employer that 
is a covered contractor. This position was consistent with the 
Department's interpretation of the FLSA's anti-retaliation provision, 
which it considers to extend to job applicants. As explained in the 
Minimum Wage Executive Order rulemaking, however, the Department 
recognizes that the U.S. Court of Appeals for the Fourth Circuit has 
disagreed with its interpretation with respect to the coverage of job 
applicants, see Dellinger v. Science Applications Int'l Corp., 649 F.3d 
226 (4th Cir. 2011), and the Department therefore would not enforce its 
interpretation on this issue in that circuit. See 79 FR 60667. To the 
extent the application of the FLSA's anti-retaliation provision to job 
applicants or internal complaints is definitively resolved through the 
judicial process by the Supreme Court or otherwise, the Department 
would interpret the anti-retaliation provision under the Executive 
Order in accordance with such precedent. Id.
    Commenters generally addressed the interference and discrimination 
provisions together. Several commenters, including Demos, NELP, the 
National Council of Jewish Women, NETWORK, Women Employed, and the 
Diverse Elders Coalition, commented that these provisions were crucial 
protections for workers, who would otherwise face punishment from 
employers for using paid sick leave or be deterred from asking to use 
paid sick leave in the first place. The NYC Department of Consumer 
Affairs similarly commented that these provisions are fundamental 
because without them, the paid sick leave benefit is merely illusory. 
The Department adopts the provisions as proposed.
    AGC commented that contractors needed to be able to address 
employee abuse of paid sick leave without being in jeopardy of 
violating these provisions. The Department recognizes that there will 
be circumstances in which an employer becomes aware that an employee 
has fraudulently used paid sick leave, such as by lying about being 
sick or having a doctor's appointment. As in the FMLA context, an 
employee who engages in fraud is not entitled to the benefits or 
protections afforded by the Executive Order or part 13. See 29 CFR 
825.216(d) (``An employee who fraudulently obtains FMLA leave from an 
employer is not protected by FMLA's job restoration or maintenance of 
health

[[Page 67651]]

benefits provisions.''). Accordingly, although a contractor may not 
impose requirements on an employee's use of paid sick leave 
specifically prohibited by the Order or part 13 (such as by requiring 
certification of uses of paid sick leave that are shorter than 3 full 
consecutive days) or otherwise discourage an employee's legitimate use 
of paid sick leave (such as by disciplining an employee on the basis of 
abuse of paid sick leave privileges that is suspected but not 
verified), a contractor may investigate situations in which it believes 
an employee has committed fraud. If a contractor determines, based on a 
reasonable investigation of the circumstances, that an employee has 
abused paid sick leave, it may respond appropriately, such as by 
recouping (to the extent permitted by law) pay and benefits provided 
when the employee used paid sick leave based on a request premised on 
false information or by imposing discipline on the employee. In the 
absence of verification of abuse, however, a contractor must permit an 
employee to accrue and use paid sick leave according to the 
requirements of part 13.
    For example, assume an employee requests to use paid sick leave to 
be absent every other Monday for several weeks, explaining that her 
wife has doctors' appointments and needs her care, and the contractor 
suspects she is actually taking long weekend trips to a vacation home. 
The contractor can tell the employee that it suspects she is making 
fraudulent requests for leave because it doubts her husband only needs 
to see the doctor on days adjacent to weekends. In response, the 
employee could provide additional information about her need to be 
absent from work, such as by explaining that her wife has cancer and 
receives radiation treatments every other Monday, or by voluntarily 
providing certification (such as a note from the wife's oncologist). In 
that case, the contractor would not have violated the provisions of 
Sec.  13.6, and the contractor would be assured that the employee's 
requests to use paid sick leave merited approval. As another example, 
assume an employee requests to use paid sick leave because his son is 
sick, but when his manager goes out to lunch during the work day, she 
runs into the employee at a local bar without his son, and upon her 
confronting the employee, he admits that he was not truthful about the 
reason he wanted to take the day off. In that case, the contractor 
would not have violated the provisions of Sec.  13.6, and the 
contractor would know it need not have approved the employee's request 
for paid sick leave. The contractor would be free to (among other 
possible options) rescind such approval, decline to pay the employee 
for that day, and count the day against the employee in its time and 
attendance policy.
    Finally, Vigilant asked that the Department state that if an 
employee is absent from work despite not having enough paid sick leave 
to cover the time, the contractor may count the additional time against 
the employee pursuant to its attendance policy. The Department takes no 
position in this rulemaking regarding what actions a contractor may 
take with regard to time absent from work that is not--and should not 
have been--designated as paid sick leave, though it notes that part 13 
does not absolve contractors from complying with any other relevant law 
regarding such actions and that whether a particular action constitutes 
interference or discrimination under Sec.  13.6 (such as a contractor's 
taking action against an employee who was absent for a full day after 
the human resources department erroneously told him he had 8 hours of 
paid sick leave although he actually had only 4) will depend on the 
circumstances.
    Proposed Sec.  13.6(c) provided that a contractor's failure to make 
and maintain or to make available to the WHD records for inspection, 
copying, and transcription as required by Sec.  13.25, or any other 
failure to comply with the requirements of that provision, constituted 
a violation of Executive Order 13706, part 13, and the underlying 
contract. This proposed provision was derived from paragraph (g)(3) of 
the contract clause included in the Minimum Wage Executive Order Final 
Rule as well as analogous provisions in the SCA and DBA. 29 CFR 
4.6(g)(3) (SCA); 29 CFR 5.5(a)(3)(iii) (DBA). The Department received 
no comments specifically regarding this provision (though it notes that 
other comments regarding recordkeeping and remedies for violations of 
part 13 are discussed below), and adopts it as proposed.
Section 13.7 Waiver of Rights
    Proposed Sec.  13.7 provided that employees cannot waive, nor may 
contractors induce employees to waive, their rights under Executive 
Order 13706 or part 13. The Department explained in the NPRM that it 
had included a provision prohibiting the waiver of rights in the 
regulations implementing the Minimum Wage Executive Order. 79 FR 60667.
    The NPRM noted that, as the Department had explained in the Minimum 
Wage Executive Order rulemaking, an employee's rights and remedies 
under the FLSA, including payment of minimum wage and back wages, 
cannot be waived or abridged by contract. 79 FR 60667 (citing Tony & 
Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 302 (1985); 
Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 740 
(1981); D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 112-16 (1946); 
Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706-07 (1945)). The Supreme 
Court has explained that ``FLSA rights cannot be abridged by contract 
or otherwise waived because this would `nullify the purposes' of the 
statute and thwart the legislative policies it was designed to 
effectuate,'' Barrentine, 450 U.S. at 740 (quoting Brooklyn Sav. Bank, 
324 U.S. at 707), and that FLSA rights are not subject to waiver 
because they serve an important public interest by protecting employers 
against unfair methods of competition in the national economy, see Tony 
& Susan Alamo Found., 471 U.S. at 302. Similarly, under the SCA 
regulations, releases and waivers executed by employees for unpaid SCA 
wages (and fringe benefits) are without legal effect. 29 CFR 4.187(d). 
The Department believed it was appropriate to adopt this policy in the 
NPRM because the interests underlying the issuance of Executive Order 
13706 would be similarly thwarted by permitting workers to waive their 
rights under the Order or part 13.
    EEAC urged the Department to limit the waiver of rights provision 
to prospective waivers, that is, to allow an employee to waive claims 
to any remedy for an employer's past violations of the paid sick leave 
requirements of the Order and part 13. EEAC asserted that the FLSA and 
FMLA permit waiver of claims based on past employer conduct, and that 
prohibiting such waiver under this Order would interfere with an 
employee's ability to release or settle, rather than litigate, 
employment-related matters.
    The Department disagrees with the commenter's rationale. It is 
correct that, although the FLSA and FMLA prohibit any prospective 
waiver of rights, employees have some ability to settle or release 
claims based on past employer conduct. See, e.g., 29 U.S.C. 218c(b)(2) 
(``The rights and remedies [under the FLSA] may not be waived by any 
agreement, policy, form, or condition of employment.''); 29 U.S.C. 
216(c) (providing that an employee may agree, under the supervision of 
the Secretary, to accept payment of compensation owed and, upon full 
payment, waive rights to unpaid compensation); Cheeks v. Freeport 
Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015) (describing the

[[Page 67652]]

history of and limitations on waiver of rights under FLSA); 29 CFR 
825.220(d) (``[E]mployees . . . cannot `trade off' the right to take 
FMLA leave against some other benefit offered by the employer. This 
does not prevent the settlement or release of FMLA claims by employees 
based on past employer conduct.''). Those statutes, however, grant to 
an employee a private right of action, 29 U.S.C. 216(b) (FLSA); 29 CFR 
825.400(a)(2) (FMLA), whereas Executive Order 13706 does not enable 
employees to pursue claims of violations of the Order on their own 
behalf, but rather vests enforcement authority in the Secretary to 
initiate an investigation of alleged violations, obtain compliance 
where violations are discovered, and participate in enforcement 
proceedings against a contractor where such violations are disputed. 
See 80 FR 54699. Therefore, as a preliminary matter, waivers of 
contractor liability, if they were permitted, would be limited: At 
most, an employee could agree not to file a complaint with the WHD or 
not to cooperate with an investigation or enforcement action the WHD 
was pursuing.
    Furthermore, such an agreement would deprive the Secretary of 
important notice, testimony, and evidence needed to determine whether a 
violation has occurred and would therefore limit the Secretary's 
ability to obtain specific relief for employees whose rights have been 
curtailed and to vindicate the general public interest in ensuring that 
employees who work on or in connection with covered contracts have 
access to paid sick leave. The SCA also does not create a private right 
of action, instead vesting sole enforcement authority in the Secretary, 
29 CFR 4.189, 4.191, and it prohibits all releases or waivers for 
unpaid wages and fringe benefits due without distinguishing between 
prospective waiver and waiver of claims based on past employer conduct, 
29 CFR 4.187(d). For these reasons as well as those explained in the 
Minimum Wage Executive Order rulemaking and reiterated in the NPRM, 
permitting any waiver of rights under the Order would be inconsistent 
with public policy and the Order's purposes.
Section 13.8 Multiemployer Plans or Other Funds, Plans, or Programs
    Some commenters, including MCAA, AGC, and North American 
Dismantling Corp., noted what they perceived to be the difficulty of 
monitoring paid sick leave accrual and reinstatement in the 
construction industry, in which employees may work for a contractor on 
a short-term basis, sometimes more than once over the course of a year. 
As explained in the discussion of employee coverage, a worker's 
seasonal or part-time status does not affect a contractor's obligations 
under the Order and part 13--including to track hours worked on with a 
covered contract, which contractors with DBA-covered contracts will 
already do, and to reinstate paid sick leave upon rehiring an employee 
within 12 months of a separation from employment--although in practice, 
the employee's accrual and use of paid sick leave will be limited by 
his work schedule. The Department recognizes that in situations like 
those described by these commenters, some employers resolve the issues 
such transient employment can raise by providing benefits to employees 
by contributing to multiemployer plans negotiated pursuant to CBAs. The 
Building Trades specifically explained that in the construction 
industry, multiemployer plans that provide benefits such as health 
insurance, pension benefits, or vacation time are common. They 
therefore asked that the Department allow contractors to create 
multiemployer plans to jointly provide paid sick leave to comply with 
the Order and part 13 as employees move between different contractors' 
projects. AGC similarly requested that, if the Order and part 13 must 
apply to laborers and mechanics, the Department permit contractors to 
fulfill their paid sick leave obligations by making payments into a 
multiemployer plan on behalf of covered workers, noting that some 
existing multiemployer plans already provide for paid time off.
    In response to these comments, the Department has added a new 
provision, Sec.  13.8(a), to the Final Rule providing that a contractor 
may fulfill its obligations under Executive Order 13706 and this part 
jointly with other contractors--that is, as though all of the 
contractors are a single contractor for purposes of Executive Order 
13706 and part 13--through a multiemployer plan that provides paid sick 
leave in compliance with the rules and requirements of Executive Order 
13706 and this part. (The term multiemployer plan is defined in Sec.  
13.2.) This new provision also provides that regardless of what 
functions the plan performs, each contractor remains responsible for 
any violation of the Order or part 13 that occurs during its employment 
of the employee.
    Under Sec.  13.8(a), if employees who work on or in connection with 
covered contracts receive access to paid sick leave through a 
multiemployer plan, the contractors that make contributions to that 
plan on behalf of the employees satisfy their obligations under the 
Order and part 13 as though they are all a single employer for purposes 
of Executive Order 13706 and part 13. For example, assume an employee 
is a member of a union that has a CBA with Contractors A and B that 
provides that the employers will contribute to a multiemployer plan to 
provide paid sick leave that complies with the requirements of the 
Executive Order and part 13. If that employee works for Contractor A on 
a DBA contract for a single pay period and accrues 2 hours of paid sick 
leave, and she subsequently works for Contractor B on a different DBA 
contract for several pay periods, the employee would begin the job for 
Contractor B with 2 hours of paid sick leave available for use and 
would accrue additional paid sick leave that would be added to those 2 
hours for purposes of the accrual cap (of no less than 56 hours) for 
which the CBA provides. In such a scenario, Contractor A and Contractor 
B are separately responsible for complying with the Order and part 13 
as to the employee's accrual and use of paid sick leave while working 
for each respective employer; for example, if Contractor B denied an 
employee's valid request to use paid sick leave the employee accrued 
while working for Contractor A, Contractor B would have violated Sec.  
13.6, and Contractor A would not be responsible for that violation. To 
the extent the plan or any third party that administers the plan plays 
a role in administering paid sick leave--for example, by tracking 
accrual, notifying employees of the amounts of paid sick leave they 
have accrued but not used, responding to employee requests to use paid 
sick leave, or providing employees with the pay and benefits to which 
they are entitled while using paid sick leave--the contractor for which 
the employee is working at the time such actions are taken is 
responsible for ensuring that the plan performs those functions in 
compliance with the requirements of the Order and part 13.
    AGC asked that the Department revise the proposed regulations to 
allow contractors to fulfill their paid sick leave obligations by 
contributing to a funded plan outside the multiemployer plan context, 
whether a contractor creates such a plan pursuant to a CBA or not. The 
Department did not intend any proposed regulatory provision or other 
interpretation in the NPRM to prohibit a contractor from providing paid 
sick leave by contributing to a plan, as long as the contractor's 
employees have access to paid sick leave that meets all of the 
requirements of the Order and part 13. For purposes

[[Page 67653]]

of clarity and completeness, the Department has added to the 
regulations, as Sec.  13.8(b), a provision stating that nothing in part 
13 prohibits a contractor from providing paid sick leave through a 
fund, plan, or program. The new provision also notes that regardless of 
the manner in which a contractor provides paid sick leave or what 
functions any fund, plan, or program performs, the contractor remains 
responsible for any violation of the Order or part 13 with respect to 
any of its employees. In other words, a contractor would be free to 
delegate to a fund, plan, or program--terms the Department intends to 
have the meaning they do for purposes of the DBA, see 29 CFR 5.27 
(``The phrase `fund, plan, or program' is merely intended to recognize 
the various types of arrangements commonly used to provide fringe 
benefits through employer contributions.'')--any or all of its 
responsibilities under the Order and part 13. For example, the plan 
might simply provide pay and benefits to an employee using paid sick 
leave upon receiving instructions from a contractor to do so, or it 
could also notify employees of their amounts of accrued paid sick leave 
and even approve or deny requests to use the leave. The contractor 
would remain ultimately responsible, however, for ensuring that its 
obligations under the Order and part 13 are satisfied, and the 
contractor would be liable for any violations of the Order and part 13 
regardless of whether it has made proper contributions to the plan.
    Finally, the Department notes that nothing in Sec.  13.8 (or any 
other provision of part 13) has any effect on any claims procedure or 
enforcement standards under ERISA that apply to plans that provide paid 
sick leave.
Subpart B--Federal Government Requirements
    Subpart B of part 13, which is largely modeled on subpart B of the 
Minimum Wage Executive Order implementing regulations, 29 CFR 10.11-
10.12, establishes the requirements for the Federal Government to 
implement and comply with Executive Order 13706. Section 13.11 
addresses contracting agency requirements, and Sec.  13.12 explains the 
requirements placed upon the Department of Labor.
Section 13.11 Contracting Agency Requirements
    Proposed Sec.  13.11(a) implemented section 2(a) of Executive Order 
13706 by directing that the contracting agency include the Executive 
Order paid sick leave contract clause set forth in appendix A of part 
13 in all covered contracts and solicitations for such contracts, as 
described in Sec.  13.3, except for procurement contracts subject to 
the FAR. Proposed Sec.  13.11(a) further provided that the required 
contract clause directs, as a condition of payment, that all employees 
performing work on or in connection with covered contracts be permitted 
to accrue and use paid sick leave as required by Executive Order 13706 
and part 13. It also provided that for procurement contracts subject to 
the FAR, contracting agencies must use the contract clause set forth in 
the FAR to implement part 13, and that the FAR clause will accomplish 
the same purposes as the clause set forth in appendix A and be 
consistent with the requirements set forth in part 13. The Department 
explained in the NPRM that proposed Sec.  13.11(a) was effectively 
identical to 29 CFR 10.11(a), the analogous provision in the Minimum 
Wage Executive Order Final Rule.
    PSC commented that contractors' compliance with the Order and part 
13 should not be a condition of payment, arguing in part that this 
requirement could expose contractors to liability under the False 
Claims Act. As described in greater detail below in the discussion of 
subpart C, the Department declines to alter this provision because 
section 2(a) of the Order specifically requires a contract clause that 
renders compliance with the Order a condition of payment. See 80 FR 
54697. The Department therefore adopts Sec.  13.11(a) in the Final Rule 
as proposed.
    The Department reiterates that, as noted in the NPRM, inserting the 
full contract clause in a covered contract is an effective and 
practical means of ensuring that contractors receive notice of their 
obligations under the Executive Order and part 13, and the Department 
therefore prefers that covered contracts include the contract clause in 
full. As discussed in the NPRM and below in the discussion of subpart 
C, however, particular facts and circumstances may establish that the 
contracting agency or contractor sufficiently apprised the prime or 
lower-tier contractor that the Executive Order applied to the contract 
despite the failure to include the contract clause in full in the 
contract. See Nat'l Electro-Coatings, Inc. v. Brock, No. C86-2188, 1988 
WL 125784 (N.D. Ohio July 13, 1988); In the Matter of Progressive 
Design & Build, Inc., WAB Case No. 87-31, 1990 WL 484308 (WAB Feb. 21, 
1990). In such circumstances, the contract clause may be deemed to have 
been incorporated by reference in the covered contract. For example, 
the full contract clause will be deemed to have been incorporated by 
reference in a covered contract if the contract provides that 
``Executive Order 13706--Establishing Paid Sick Leave for Federal 
Contractors, and its implementing regulations, including the applicable 
contract clause, are incorporated by reference into this contract as if 
fully set forth in this contract'' and includes a citation to a Web 
page that contains the contract clause in full, to the provision of the 
Code of Federal Regulations containing the contract clause set forth at 
appendix A to part 13, or to the provision of the FAR containing the 
contract clause promulgated by the FARC to implement part 13.
    Proposed Sec.  13.11(b) explained a contracting agency's 
obligations in the event that it fails to include the contract clause 
in a covered contract. Proposed Sec.  13.11(b) first provided that 
where the Department of Labor or the contracting agency discovers or 
determines, whether before or subsequent to a contract award, that the 
contracting agency made an erroneous determination that Executive Order 
13706 and part 13 did not apply to a particular contract and/or failed 
to include the applicable contract clause in a contract to which the 
Executive Order and part 13 apply, the contracting agency, on its own 
initiative or within 15 calendar days of notification by an authorized 
representative of the Department of Labor, would incorporate the clause 
in the contract retroactive to commencement of performance under the 
contract through the exercise of any and all authority that may be 
needed (including, where necessary, its authority to negotiate or 
amend, its authority to pay any necessary additional costs, and its 
authority under any contract provision authorizing changes, 
cancellation, and termination). The proposed language mirrored the 
analogous provision in the Minimum Wage Executive Order's Final Rule, 
see 29 CFR 10.11(b), which the Department developed based on similar 
authority existing under the analogous SCA, see 29 CFR 4.5(c), and DBA, 
see 29 CFR 1.6(f), implementing regulations.
    Roffman Horvitz suggested that it would be unfair to impose a 
retroactive obligation when a contracting officer or the Department 
discovers after the contract has begun that the contract clause was 
omitted. AGC requested that the Department require contracting agencies 
to use the adjustments, or change-order, process to govern any cost 
increases related to retroactively incorporating the contract clause. 
PSC similarly requested that the Department expressly require a price 
or cost adjustment when a contracting agency

[[Page 67654]]

fails to include the contract clause in a covered contract.
    After carefully considering these comments, the Department adopts 
Sec.  13.11(b) without change. The Order directs the Department to the 
extent practicable to incorporate procedures and enforcement processes 
that exist under the SCA, DBA, and Minimum Wage Executive Order. The 
Department's approach incorporates the procedure used under the Minimum 
Wage Executive Order (which the Department derived from similar SCA and 
DBA procedures) when a contracting agency has failed to include the 
contract clause and does not limit a contracting agency's authority to 
pay any necessary additional costs. Furthermore, the Department 
believes, as it did with respect to the Minimum Wage Executive Order 
rulemaking, that this procedure will promote compliance with the Order 
consistent with section 4(a) of the Order.
    Proposed Sec.  13.11(c) provided that a contracting officer would, 
upon his or her own action or upon written request of the 
Administrator, withhold or cause to be withheld from the prime 
contractor under the contract or any other Federal contract with the 
same prime contractor, so much of the accrued payments or advances as 
may be necessary to pay employees the full amount owed to compensate 
for any violation of Executive Order 13706 or part 13. It further 
provided that in the event of any such violation, the agency may, after 
authorization or by direction of the Administrator and written 
notification to the contractor, take action to cause suspension of any 
further payment or advance of funds until such violations have ceased. 
Such amounts would be based on the estimated monetary relief, including 
any pay and/or benefits denied or lost by reason of the violation, or 
other monetary losses sustained as a direct result of the violation as 
described in Sec.  13.44.
    The SCA, DBA, and Minimum Wage Executive Order's implementing 
regulations provide for withholding to ensure the availability of 
monies for payment to covered workers when a contractor or 
subcontractor has failed to comply with its obligations to pay required 
wages (including fringe benefits where applicable). 29 CFR 4.6(i) 
(SCA); 29 CFR 5.5(a)(2) (DBA); 29 CFR 10.11(c) (Executive Order 13658). 
The Department reasoned that withholding likewise is an appropriate 
remedy under this Executive Order because the Order directs the 
Department to adopt enforcement processes from the SCA, DBA, and 
Minimum Wage Executive Order to the extent practicable and to exercise 
authority to obtain compliance with the Order. 80 FR 54699. Consistent 
with withholding procedures under the SCA and DBA, which were also 
adopted in the Minimum Wage Executive Order rulemaking, proposed Sec.  
13.11(c) would allow the contracting agency and the Department to 
withhold or cause to be withheld funds from the prime contractor not 
only under the contract on which violations of the paid sick leave 
requirements of Executive Order 13706 and part 13 occurred, but also 
under any other contract that the prime contractor has entered into 
with the Federal Government. 29 CFR 4.6(i) (SCA); 29 CFR 5.5(a)(2) 
(DBA); 29 CFR 10.11(c) (Executive Order 13658).
    Proposed Sec.  13.11(c) also provided that any failure to comply 
with the requirements of Executive Order 13706 or part 13 could be 
grounds for termination of the right to proceed with the contract work. 
Under the proposed rule, in such event, the contracting agency could 
enter into other contracts or arrangements for completion of the work, 
charging the contractor in default with any additional cost. This 
language was essentially identical to language included in the 
analogous provision in the Minimum Wage Executive Order rulemaking. See 
79 FR 60724 (codified at 29 CFR 10.11(c)).
    AGC requested that contracting officers not have authority to 
withhold payments to a prime contractor, asserting that contracting 
officers lack a standard upon which to determine that an alleged 
violation rises to the level of an actual or actionable violation and 
that it would accordingly be suitable to compel contracting officers to 
forward all allegations of noncompliance to the Department for 
investigation. As the Department noted above, the proposed provision, 
consistent with the Order's directive to incorporate procedures and 
enforcement processes under the SCA, DBA and Minimum Wage Executive 
Order, mirrors regulations under the SCA, DBA, and Minimum Wage 
Executive Order that authorize contracting officers to withhold monies 
from accrued payments or advances as may be considered necessary to pay 
employees the full amount owed to compensate for any violation of the 
DBA, SCA, or Minimum Wage Executive Order. In addition, the Department 
believes that authorizing contracting officers to withhold in the 
circumstances contemplated by Sec.  13.11(c) will help the Department 
to obtain compliance with the Order's requirements consistent with 
section 4(a) of the Order. Although the Department anticipates that 
contracting officers typically will effectuate withholding in response 
to written requests from the Administrator, the Department also 
believes that contracting officers should have the authority (as they 
do under the SCA, DBA and Minimum Wage Executive Order) to withhold on 
their own action when such withholding may be necessary to pay 
employees the full amount owed to compensate for any violation of 
Executive Order 13706 or part 13.
    AGC also suggested that the Department prohibit contracting 
agencies from canceling or terminating a contract that fails to include 
the paid sick leave contract clause. The Department wishes to reaffirm 
that the authority of a contracting agency to cancel or terminate a 
contract is conditioned on a contractor's failure to comply with the 
Order or part 13. The Department modeled this authority on a 
contracting agency's authority to cancel a contract under the Minimum 
Wage Executive Order, see 29 CFR 10.11(c), which itself reflected a 
contracting agency's power under the SCA, see 29 CFR 4.6(i), and DBA, 
see 29 CFR 5.5(a)(7). Because the Order instructs the Department to 
incorporate enforcement processes under the Minimum Wage Executive 
Order, SCA, and DBA to the extent practicable, and because the 
Department believes the possibility of contract termination by a 
contracting agency due to a contractor's failure to comply with the 
Order will advance the Department's efforts to obtain compliance with 
the Order, the Department declines to adopt the commenter's suggestion. 
For all of the reasons described, the Department adopts Sec.  13.11(c) 
as proposed, except that it has corrected an inadvertent omission: The 
second sentence now provides that an agency may act to suspend not just 
a payment or advance, but also a guarantee of funds consistent with the 
DBA regulations at 29 CFR 5.5(a)(2) (as well as paragraph (d) of the 
contract clause in appendix A as proposed and adopted).
    Proposed Sec.  13.11(d) described a contracting agency's 
responsibility to suspend further payment or advance of funds to a 
contractor that fails to make available for inspection, copying, and 
transcription any of the records identified in Sec.  13.25. The 
proposal required contracting agencies to take action to suspend 
payment or advance of funds under these circumstances upon their own 
action, or upon the direction of the Administrator and notification of 
the contractor. Proposed Sec.  13.11(d) was derived from paragraph 
(g)(3) of the Minimum Wage Executive

[[Page 67655]]

Order contract clause, 79 FR 60731, and was consistent with the 
analogous provisions of the SCA and DBA regulations, 29 CFR 4.6(g)(3) 
(SCA); 29 CFR 5.5(a)(3)(iii) (DBA). The Department did not receive any 
comments on proposed Sec.  13.11(d) and therefore adopts the provision 
as proposed except that it corrects the same omission of a reference to 
suspending a guarantee of funds described with respect to Sec.  
13.11(c).
    Proposed Sec.  13.11(e) described a contracting agency's 
responsibility to forward to the WHD any complaint alleging a 
contractor's non-compliance with Executive Order 13706 or part 13, as 
well as any information related to the complaint. Although the 
Department proposed in Sec.  13.41 that complaints be filed with the 
WHD rather than with contracting agencies, the Department recognized 
that some employees or other interested parties nonetheless could file 
formal or informal complaints concerning alleged violations of the 
Executive Order or part 13 with contracting agencies. Proposed Sec.  
13.11(e)(1) therefore specifically required the contracting agency to 
transmit the complaint-related information identified in proposed Sec.  
13.11(e)(2) to the WHD's Office of Government Contracts Enforcement 
within 14 calendar days of receipt of a complaint alleging a violation 
of the Executive Order or part 13, or within 14 calendar days of being 
contacted by the WHD regarding any such complaint.
    Proposed Sec.  13.11(e)(2) described the contents of any 
transmission under proposed Sec.  13.11(e)(1). Specifically, it 
provided that the contracting agency would forward to the Office of 
Government Contracts Enforcement any: (i) Complaint of contractor 
noncompliance with Executive Order 13706 or part 13; (ii) available 
statements by the worker, contractor, or any other person regarding the 
alleged violation; (iii) evidence that the Executive Order paid sick 
leave contract clause was included in the contract; (iv) information 
concerning known settlement negotiations between the parties, if 
applicable; and (v) any other relevant facts known to the contracting 
agency or other information requested by the WHD.
    Proposed Sec.  13.11(e) was nearly identical to 29 CFR 10.11(d) as 
promulgated by the Minimum Wage Executive Order Final Rule, which was 
derived from analogous provisions in the Department's regulations 
implementing the Nondisplacement Executive Order. 79 FR 60669 (citing 
29 CFR 9.11(d)). In the NPRM, the Department stated that proposed Sec.  
13.11(e), which included an obligation to send such complaint-related 
information to the WHD even absent a specific request (e.g., when a 
complaint was filed with a contracting agency rather than with the 
WHD), was appropriate because prompt receipt of such information from 
the relevant contracting agency would allow the Department to fulfill 
its charge under the Order to obtain compliance with the Order. 80 FR 
54699. The proposed requirement was consistent with the requirements in 
the Minimum Wage Executive Order rulemaking. The Department did not 
receive any comments on proposed Sec.  13.11(e) and therefore 
implements the provision as proposed.
    Proposed Sec.  13.11(f) stated that a contracting officer would 
provide to a successor contractor any predecessor contractor's 
certified list, provided to the contracting officer pursuant to 
proposed Sec.  13.26, of the amounts of unused paid sick leave that 
employees have accrued. The Department intended this requirement to 
facilitate compliance by successor contractors with Sec.  13.5(b)(4), 
which required that paid sick leave be reinstated for employees rehired 
by a successor contractor within 12 months of the job separation from 
the predecessor contractor. Because that provision does not appear in 
the Final Rule, as explained above, the Department has also removed 
this provision from the Final Rule.
Section 13.12 Department of Labor Requirements
    Proposed Sec.  13.12 set forth the Department's obligations under 
the Executive Order. Proposed Sec.  13.12(a) addressed notice-related 
requirements. Specifically, proposed Sec.  13.12(a)(1) stated that the 
Administrator would publish and maintain on Wage Determinations OnLine 
(WDOL), http://www.wdol.gov, or any successor Web site, a notice that 
Executive Order 13706 creates a requirement to allow employees 
performing work on or in connection with contracts covered by Executive 
Order 13706 and part 13 to accrue and use paid sick leave, as well as 
an indication of where to find more complete information about that 
requirement. Proposed Sec.  13.12(a)(2) provided that the Administrator 
would also publish a notice on all wage determinations issued under the 
DBA and SCA that Executive Order 13706 creates a requirement to allow 
employees performing work on or in connection with contracts covered by 
Executive Order 13706 and part 13 to accrue and use paid sick leave, as 
well as an indication of where to find more complete information about 
that requirement.
    Many commenters, including the NYC Department of Consumer Affairs 
and the Center for the Study of Social Policy, supported the 
Department's proposal to create a notice poster. The Department adopts 
Sec.  13.12(a) as proposed and will publish the notice poster on the 
WHD Web site.
    Proposed Sec.  13.12(b), which was modeled on 29 CFR 10.12(d) as 
promulgated by the Minimum Wage Executive Order rulemaking, addressed 
the Department's obligation to notify a contractor of a request to the 
contracting agency for the withholding of funds or a request for the 
suspension of payment or advance of funds. As explained above, Sec.  
13.11(c) authorizes the Administrator to direct that payments due on 
the covered contract or any other contract between the contractor and 
the Federal Government be withheld as may be considered necessary to 
provide for monetary relief for violations of Executive Order 13706 or 
part 13, and Sec.  13.11(d) authorizes the Administrator to direct that 
the contracting agency suspend payment, advance, or guarantee of funds. 
If the Administrator made the requests contemplated by Sec.  13.11(c) 
or (d), proposed Sec.  13.12(b) would require the Administrator and/or 
the contracting agency to notify the affected prime contractor of the 
Administrator's withholding request to the contracting agency. Although 
it is only necessary that one party--either the Administrator or the 
contracting agency--provide the notice, the other can choose in its 
discretion to provide notice as well. The Department did not receive 
any comments addressing proposed Sec.  13.12(b) and implements the 
provision as proposed, although it has inserted a reference to a 
guarantee of funds for the reasons explained in the discussion of Sec.  
13.11(c).
Subpart C--Contractor Requirements
    Subpart C of part 13 describes the requirements with which 
contractors must comply under Executive Order 13706 and part 13. It 
sets forth the obligations to include the applicable paid sick leave 
contract clause in subcontracts and lower-tier contracts as well as to 
comply with the contract clause. It also sets forth contractor 
requirements pertaining to deductions, kickbacks, recordkeeping, 
notice, and timing of pay.
Section 13.21 Contract Clause
    Proposed Sec.  13.21(a), which implemented section 2(a) of the 
Order and was adopted from 29 CFR 10.21 as promulgated by the Minimum 
Wage

[[Page 67656]]

Executive Order Final Rule, required the contractor, as a condition of 
payment, to abide by the terms of the applicable paid sick leave 
contract clause referred to in Sec.  13.11(a). The applicable contract 
clause would contain the requirements with which the contractor must 
comply on the covered contract. PSC requested that the Department 
remove the language in proposed Sec.  13.21(a) rendering compliance 
with the Order and part 13 a ``condition of payment.'' PSC asserted 
this language exposes contractors to potential False Claims Act 
liability and is unnecessary because the Department proposed sufficient 
remedial options in Sec.  13.44. However, section 2(a) of the Executive 
Order specifically requires a contract clause that renders compliance 
with the Order a condition of payment. 80 FR 54697. Thus, the 
Department declines to accept PSC's suggestion and adopts Sec.  13.21 
in the Final Rule as proposed.
    Proposed Sec.  13.21(b) required that contractors include the 
applicable contract clause in any covered subcontracts and, as a 
condition of payment, that subcontractors include the clause in all 
lower-tier subcontracts. Under the proposal, the prime contractor and 
upper-tier contractors would be responsible for compliance by any 
subcontractor or lower-tier subcontractor with Executive Order 13706 
and part 13, regardless of whether the contract clause was included in 
the subcontract. This responsibility on the part of prime and upper-
tier contractors for subcontractor compliance, which is commonly 
referred to as ``flow-down'' liability, paralleled that of the SCA, 
DBA, and Minimum Wage Executive Order. See 29 CFR 4.114(b) (SCA); 29 
CFR 5.5(a)(6) (DBA); 29 CFR 10.21(b) (Executive Order 13658).
    EEAC and Vigilant requested that covered contractors be permitted 
to incorporate the contract clause by reference into covered 
subcontracts. As the Department noted with respect to insertion of the 
contract clause in the discussion of Sec.  13.11(a), the Department 
prefers that contractors include the contract clause in full in covered 
contracts, including covered subcontracts. However, there may be facts 
and circumstances establishing that the contractor sufficiently 
apprised the lower-tier subcontractor that the Order applies to the 
subcontract despite the contractor's failure to include the contract 
clause in full in the covered subcontract. The Department notes, for 
example, that the full contract clause will be deemed to have been 
incorporated by reference in a covered subcontract if the subcontract 
provides that ``Executive Order 13706--Establishing Paid Sick Leave for 
Federal Contractors, and its implementing regulations, including the 
applicable contract clause, are incorporated by reference into this 
contract as if fully set forth in this contract'' and includes a 
citation to a Web page that contains the contract clause in full, to 
the provision of the Code of Federal Regulations containing the 
contract clause set forth at appendix A to part 13, or to the provision 
of the FAR containing the contract clause promulgated by the FARC to 
implement part 13.
    AGC requested that the Department delete the final sentence of 
proposed Sec.  13.21(b), which imposes flow-down liability on upper-
tier contractors. AGC specifically asserts that it is more difficult 
for upper-tier contractors to monitor lower-tier contractors' 
compliance with the Order's requirements than it is to monitor such 
contractors' compliance with DBA requirements. ABC similarly contended 
it will be difficult for upper-tier contractors to monitor lower-tier 
contractors' compliance with the Order, noting, as did AGC, that 
employees working for lower-tier contractors with which upper-tier 
contractors subcontract may have accrued paid sick leave on other 
covered contracts. The Chamber/IFA requested that the Department detail 
the types of activities that upper-tier contractors would be expected 
to conduct in order to ensure compliance by subcontractors. NECA 
contended the cost of lower-tier compliance oversight will increase 
project costs and that the Department should accordingly consider 
alternative enforcement mechanisms. Finally, Vigilant questioned the 
Department's authority to impose flow-down liability, suggesting that 
an upper-tier contractor's sole responsibility should be to incorporate 
the contract clause in its subcontract.
    After careful consideration of the comments received, the 
Department has decided to adopt Sec.  13.21(b) as proposed. In response 
to the comments submitted by the Chamber/IFA and NECA, as well as 
comments from AGC and ABC asserting that upper-tier contractors' 
oversight of lower-tier contractors here may present challenges not 
present under the DBA and SCA, the Department notes that covered 
contractors are required to insert the applicable contract clause in 
subcontracts in order to inform covered subcontractors of the 
requirements with which they must comply, and that covered contractors 
have the latitude to implement additional measures to promote 
compliance by subcontractors, including emphasizing to subcontractors 
that the Executive Order and part 13 apply to employees performing work 
on or in connection with covered subcontracts and directing covered 
subcontractors to the portions of this Final Rule and related guidance 
materials that explain the rule's application to such employees. The 
Department further notes that upper-tier contractors can, and the 
Department understands often do, indemnify themselves against 
violations committed by lower-tier contractors. With respect to 
Vigilant's comment, both the SCA and DBA, to which the Order directs 
the Department to look in adopting remedies and enforcement processes, 
have long permitted the Department to hold a prime contractor 
responsible for compliance by any lower-tier contractor, see 29 CFR 
4.114(b) (SCA); 29 CFR 5.5(a)(6) (DBA), and the Minimum Wage Executive 
Order's implementing regulations make the prime and upper-tier 
contractors responsible for compliance by any lower-tier contractor, 
see 29 CFR 10.21(b). Removal of this obligation, as AGC has requested, 
could diminish the level of care contractors exercise in selecting 
subcontractors on covered contracts and reduce contractors' monitoring 
of the performance of subcontractors--two ``vital functions'' served by 
the flow-down responsibility. In the Matter of Bongiovanni, WAB Case 
No. 91-08, 1991 WL 494751 (WAB April 19, 1991). Removal of this 
obligation could additionally hamper the Department's enforcement 
efforts under section 4(a) of the Order because a contractor's 
responsibility for the compliance of its lower-tier subcontractors 
enhances the Department's ability to obtain compliance with the 
Executive Order. For all these reasons, the Department declines to 
grant the request to remove the flow-down liability obligation.
Section 13.22 Paid Sick Leave
    Proposed Sec.  13.22 required contractors to allow all employees 
performing work on or in connection with a covered contract to accrue 
and use paid sick leave as required by the Executive Order and part 13. 
The Department received many comments related to contractors' paid sick 
leave obligations, which are addressed in subpart A of the preamble, 
but no comments specifically addressing Sec.  13.22. This provision is 
therefore adopted as proposed.
Section 13.23 Deductions
    Proposed Sec.  13.23 stated that contractors may only make 
deductions from the pay and benefits of an employee who is using paid 
sick leave under the limited circumstances set

[[Page 67657]]

forth in the proposed provision. The reference to ``pay and benefits'' 
in proposed Sec.  13.23 had the same meaning as the reference to pay 
and benefits in Sec.  13.5(c)(3), discussed above.
    Proposed Sec.  13.23 permitted deductions required by Federal, 
State, or local law, including Federal or State withholding of income 
taxes. See 29 CFR 531.38 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 
5.5(a)(1) (DBA); 29 CFR 10.23(a) (Executive Order 13658). This proposed 
provision also permitted deductions for payments made to third parties 
pursuant to court orders. See 29 CFR 531.39 (FLSA); 29 CFR 4.168(a) 
(SCA); 29 CFR 5.5(a)(1) (DBA); 29 CFR 10.23(b) (Executive Order 13658). 
Permissible deductions made pursuant to a court order could include 
such deductions as those made for child support. The proposed section 
also permitted deductions directed by a voluntary assignment of the 
employee or his or her authorized representative. See 29 CFR 531.40 
(FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA); 29 CFR 10.23(c) 
(Executive Order 13658). Deductions directed by a voluntary assignment 
included, but were not limited to, deductions for the purchase of U.S. 
savings bonds, donations to charitable organizations, and the payment 
of union dues. Deductions made for voluntary assignments were required 
to be made for the employee's account and benefit pursuant to the 
request of the employee or his or her authorized representative. See 29 
CFR 531.40 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) (DBA). 
Finally, the Department proposed to permit deductions made for the 
reasonable cost or fair value of board, lodging, and other facilities. 
See 29 CFR part 531 (FLSA); 29 CFR 4.168(a) (SCA); 29 CFR 5.5(a)(1) 
(DBA); 29 CFR 10.23(d) (Executive Order 13658). Deductions made for the 
reasonable cost or fair value of board, lodging and other facilities 
were required to comply with the regulations in 29 CFR part 531. In the 
proposal, the Department noted that a contractor could take credit for 
the reasonable cost or fair value of board, lodging, or other 
facilities against an employee's wages, rather than taking a deduction 
for the reasonable cost or fair value of these items. See 29 CFR part 
531. The Department did not receive comments asking for modifications 
to proposed Sec.  13.23. The Department is therefore adopting the 
language proposed, but it is also adding as Sec.  13.23(e) that 
deductions are also permissible, to the extent permitted by law, for 
the purpose of recouping pay and benefits provided for paid sick leave 
as to which the contractor retroactively denied the employee's request 
pursuant to Sec.  13.5(e)(3)(iii) or because the contractor approved 
the use of the paid sick leave based on a fraudulent request. This 
addition is consistent with the discussion of Sec.  13.5(e)(3)(iii) and 
of comments regarding employee abuse of paid sick leave benefits.
Section 13.24 Anti-Kickback
    Proposed Sec.  13.24 required that all paid sick leave used by 
employees performing work on or in connection with covered contracts be 
paid free and clear and without subsequent deduction (unless as set 
forth in Sec.  13.23), rebate, or kickback on any account. It further 
prohibited kickbacks directly or indirectly to the contractor or to 
another person for the benefit of the contractor for the whole or part 
of the paid sick leave. The proposal was derived from the Executive 
Order 13658 Final Rule at 29 CFR 10.27; it reflected the Department's 
intent to ensure that employees actually receive the full pay and 
benefits to which they are entitled under the Executive Order and part 
13. The Department received no comments on this provision and adopts it 
as proposed.
Section 13.25 Records To Be Kept by Contractors
    Proposed Sec.  13.25 explained the recordkeeping and related 
requirements for contractors. The obligations set forth in proposed 
Sec.  13.25 were derived from the FLSA, SCA, DBA, FMLA and Executive 
Order 13658. See 29 CFR part 516 (FLSA); 29 CFR 4.6(g) (SCA); 29 CFR 
5.5(a)(3) (DBA); 29 CFR 825.500(c) (FMLA); 29 CFR 10.26 (Executive 
Order 13658). Proposed Sec.  13.25(a) required contractors and 
subcontractors to make and maintain during the course of the covered 
contract, and preserve for no less than 3 years thereafter, records 
containing the information enumerated in proposed Sec.  13.25(a)(1)-
(15). It also required contractors to make such records available to 
the WHD for inspection, copying, and transcription.
    Proposed Sec.  13.25(a)(1)-(6) required contractors to make and 
maintain for each employee: Name, address, and Social Security number; 
the employee's occupation(s) or classification(s); the rate or rates of 
wages paid; the number of daily and weekly hours worked; any deductions 
made; and the total wages paid each pay period. Contractor obligations 
to maintain the categories of records set forth in proposed Sec.  
13.25(a)(1)-(6) were derived from and are consistent across the FLSA, 
SCA, and DBA (with the exception of the requirement to preserve records 
for no less than 3 years after the contract expires, which applies 
under the DBA and SCA but not the FLSA). An exception to the 
requirement in proposed Sec.  13.25(a)(4) to keep records of an 
employee's hours worked was provided in proposed Sec.  13.25(c), as 
described below. Therefore, in conjunction with Sec.  13.25(c), these 
recordkeeping requirements imposed almost no new burdens on 
contractors.
    Proposed Sec.  13.25(a)(7) required contractors to make and 
maintain copies of notifications to employees of the amount of paid 
sick leave the employees accrued as required under Sec.  13.5(a)(2). 
Proposed Sec.  13.25(a)(8) required contractors to maintain copies of 
employees' requests to use paid sick leave, if in writing, or, if not 
in writing, any other records of employees' requests.
    Proposed Sec.  13.25(a)(9) required contractors to make and 
maintain records of the dates and amounts of paid sick leave used by 
employees and further specified that unless a contractor's paid time 
off policy satisfies the requirements of Executive Order 13706 and part 
13 as described in Sec.  13.5(f)(5), contractors must designate the 
leave in their records as paid sick leave pursuant to Executive Order 
13706. Proposed Sec.  13.25(a)(10) required contractors to make and 
maintain copies of any written denials of employees' requests to use 
paid sick leave, including explanations for such denials, as required 
under Sec.  13.5(d)(3). Proposed Sec.  13.25(a)(11) required 
contractors to make and maintain records relating to the certification 
and documentation a contractor could require an employee to provide 
under Sec.  13.5(e), including copies of any certification or 
documentation provided by an employee. Proposed Sec.  13.25(a)(12) 
required contractors to make and maintain any other records showing any 
tracking of or calculations related to an employee's accrual and/or use 
of paid sick leave.
    Proposed Sec.  13.25(a)(13) required contractors to make and 
maintain copies of any certified list of employees' accrued, unused 
paid sick leave provided to a contracting officer in compliance with 
proposed Sec.  13.26. Proposed Sec.  13.25(a)(14) required contractors 
to maintain any certified list of employees' accrued, unused paid sick 
leave received from the contracting agency in compliance with proposed 
Sec.  13.11(f). Finally, proposed Sec.  13.25(a)(15) required 
contractors to maintain a copy of the relevant covered contract. The 
Department explained that each of the recordkeeping obligations

[[Page 67658]]

set forth in proposed Sec.  13.25(a)(1)-(15) were necessary and 
appropriate for the enforcement of Executive Order 13706 and part 13 
because they require the maintenance and preservation of records 
necessary to investigate potential violations of and obtain compliance 
with the Order, consistent with sections 3(a) and 4(a) of the Order.
    The Chamber/IFA, the American Benefits Council, and Seyfarth Shaw 
asserted that the requirement to preserve records for 3 years after 
contract completion was unduly burdensome. The Department has carefully 
reviewed the commenters' concerns; however, the Department declines to 
reduce the time period required for preserving records in this Final 
Rule. Section 3(a) of the Executive Order specifically authorizes the 
Secretary to issue regulations requiring contractors to make, keep, and 
preserve such employee records as the Secretary deems necessary and 
appropriate for the enforcement of either the Order's provisions or the 
regulations issued by the Department. Section 4(a) of the Executive 
Order further authorizes the Secretary to investigate possible 
violations of and obtain compliance with the Order, and instructs the 
Department, to the extent practicable, to adopt procedures and 
enforcement processes consistent with the FLSA, SCA, DBA, FMLA, VAWA, 
and Minimum Wage Executive Order. The obligation to preserve records 
for 3 years after contract completion mirrors the recordkeeping 
requirements under the SCA and DBA, see 29 CFR 4.6(g) (SCA); 29 CFR 
5.5(a)(3) (DBA), that the Department has previously determined would 
assist in investigating possible violations of and obtaining compliance 
with those statutes' provisions. Thus, the requirements in proposed 
Sec.  13.25(a) are not undue; rather, consistent with sections 3(a) and 
4(a) of the Order, the Secretary has determined that maintenance and 
preservation of the records set forth in proposed Sec.  13.25(a) for 3 
years after contract completion is necessary and appropriate to ensure 
the Department can effectively investigate potential violations of and 
obtain compliance with the Order.
    PSC requested that the Department ``streamline'' the recordkeeping 
requirements contained in Sec.  13.25(a)(7)-(12) because, although 
those provisions reflect FMLA requirements, they are more burdensome 
here because the instances of paid sick leave will outnumber those 
under the FMLA. The ERISA Industry Committee similarly requested that 
the Department remove or otherwise decrease a contractor's 
recordkeeping requirements related to required notifications of the 
amount of paid sick leave employees have accrued. Consistent with these 
requests and as explained in the discussion of Sec.  13.5(a)(2), the 
Department has reduced the frequency with which a contractor must 
notify employees of the leave they have accrued under the Order, which 
will reduce the required recordkeeping under Sec.  13.25(a)(7). In 
addition, the Department has clarified elsewhere in this Final Rule 
that contractors may create and preserve documents electronically. With 
respect to the other recordkeeping requirements contained in Sec.  
13.25(a)(7)-(12), the Department understands that these requirements 
might result in a greater volume of recordkeeping than under the FMLA 
because there are likely to be more instances of leave under the Order 
than contractors experience under the FMLA. However, as mentioned 
above, the records the Department is requiring covered contractors to 
maintain under Sec.  13.25(a)(7)-(12) are necessary to ensure the 
Department can fulfill its enforcement mandate under the Order.
    The HR Policy Association requested that covered contractors be 
permitted to preserve the required records electronically. Similarly, 
the Chamber/IFA suggested that contractors be permitted to send 
required notifications to employees electronically to avoid the 
accumulation of paper. The ERISA Industry Committee contended that the 
voluminous records covered contractors would need to create to comply 
with the recordkeeping requirements would cause an administrative 
burden. In response to these comments, the Department clarifies that, 
as proposed, Sec.  13.25(a) allowed a covered contractor to make and 
maintain the required records electronically provided that the 
reproductions of the electronic records were clear, identifiable, 
otherwise satisfy the specific requirements of Sec.  13.25(a)(1)-(15), 
and were made available upon request. The Department additionally 
notes, however, that regardless of how a contractor maintains the 
required records, a contractor may only send information required by 
the Order and part 13 to employees electronically if the contractor 
customarily corresponds with or makes information available to its 
employees by electronic means. The Department expects that the right of 
contractors to make and maintain records electronically in the manner 
described above, which is generally consistent with FLSA and FMLA 
recordkeeping requirements under 29 CFR 516.1(a) and 825.500(b), 
respectively, should significantly reduce contractors' asserted 
recordkeeping burdens under the Order and implementing regulations.
    The Chamber/IFA, the ERISA Industry Committee, and the HR Policy 
Association also asserted that the requirement in proposed Sec.  
13.25(a)(9) to designate leave used in records as paid sick leave 
pursuant to the Order will cause confusion because the leave might also 
satisfy overlapping Federal, State, or local leave requirements. The 
Department agrees that there may be circumstances when leave taken by 
an employee under the Order also satisfies a contractor's obligations 
under another Federal, State, or local law. However, the Department 
does not agree that requiring such leave to be designated consistent 
with proposed Sec.  13.25(a)(9) will cause undue confusion. First, the 
language in the proposed rule does not preclude covered contractors 
from also designating the leave in its records as compliant with 
another legal or regulatory obligation; therefore, contractors may 
additionally designate the leave as compliant with the overlapping 
legal requirements. Second, although the Department is not requiring 
contractors to disclose records made under proposed Sec.  13.25(a)(9) 
to employees, it is possible that employees will receive documents, 
such as pay stubs, that identify leave used by employees as paid sick 
leave pursuant to the Order. Rather than causing confusion, however, 
the Department believes that such disclosures, to the extent they 
occur, will help employees stay apprised of how much paid sick leave 
they have used.
    ABC contended that the proposed rule does not address the new 
recordkeeping requirements it is imposing with respect to exempt 
employees, apparently referring to the Order's coverage of employees 
who qualify for an exemption from the FLSA's minimum wage and overtime 
provisions. Under Sec.  13.25(c) (adopted as proposed, as explained 
below), however, a contractor is excused from maintaining records of 
employees' number of daily and weekly hours worked as otherwise 
required under Sec.  13.25(a)(4) if the SCA, DBA, or FLSA do not 
require the contractor to keep records of the employees' hours worked 
and the contractor elected to use the assumption, permitted by Sec.  
13.5(a)(1)(iii), that the employee works 40 hours on or in connection 
with covered contracts in each workweek. Thus, the Department has not 
only addressed the new recordkeeping requirement with respect to exempt 
employees, it has also provided contractors an opportunity to 
significantly reduce any new

[[Page 67659]]

recordkeeping requirement with respect to such employees.
    For all of these reasons, the Department is adopting Sec.  13.25(a) 
essentially as proposed, although it has made certain modifications to 
ensure that certain provisions expressly refer to all relevant records 
and removed two entries from the list that are no longer necessary. 
Specifically, the Department has clarified that the reference to 
``wages paid'' under Sec.  13.25(a)(3) and Sec.  13.25(a)(6) includes 
all ``pay and benefits'' as those terms are used in Sec.  13.5(c)(3), 
which requires covered contractors to provide to an employee using paid 
sick leave the same pay and benefits (that is, both wages and any other 
benefits, such as but not limited to contributions toward a fringe 
benefit plan) the employee would have received had the employee not 
been absent from work. The addition of new language to Sec.  
13.25(a)(3) and Sec.  13.25(a)(6) clarifies that contractors must make 
and maintain records of benefits, such as any contributions they make 
to a fringe benefit plan on an employee's behalf. Because the 
clarification compels covered contractors to maintain documentation to 
demonstrate that they have complied with Sec.  13.5(c)(3), it will 
facilitate the Department's efforts to enforce the Order and its 
implementing regulations. The additional language is also generally 
consistent with the DBA and SCA recordkeeping requirements under 29 CFR 
5.5(a)(3)(i) and 4.6(g)(1)(ii), respectively. Additionally, the 
Department has modified Sec.  13.25(a)(10) to reflect that contractors 
must maintain records of not just written denials of requests to use 
paid sick leave, but all written responses, including approvals of such 
requests if in writing as well as denials, including explanations for 
such denials as required under Sec.  13.5(d)(3). Although under Sec.  
13.5(d)(3)(i), contractors are not required to grant employees' 
requests to use paid sick leave in writing, if they do, maintaining 
such records will facilitate any investigation by the WHD that might 
occur. The Department removed Sec.  13.5(a)(13) and Sec.  13.5(a)(14) 
because the certified list requirement, which was necessary only to 
implement the requirement that successor contractors reinstate paid 
sick leave of employees who worked for the predecessor contractor, no 
longer appears. The entries that follow have been renumbered 
accordingly. The Department has also inserted as Sec.  13.25(a)(14) the 
requirement that contractors make and maintain records of the regular 
pay and benefits provided to an employee for each use of paid sick 
leave. This provision makes explicit that records of such payments are 
required regardless of whether they are technically included in wages 
as referred to in Sec.  13.25(a)(6). Finally, the Department inserted 
as Sec.  13.25(a)(15) a requirement that a contractor make and maintain 
records of any financial payment made for unused paid sick leave upon a 
separation from employment that, pursuant to Sec.  13.5(b)(5), relieves 
a contractor from the obligation to reinstate such paid sick leave as 
otherwise required by Sec.  13.5(b)(4). This provision follows from the 
change to Sec.  13.5(b)(5) described above; because financial payments 
can under the Final Rule affect a contractor's reinstatement 
obligation, it would be important in any investigation that a 
contractor have records showing that such payments were made.
    Proposed Sec.  13.25(b) related to the segregation of employees' 
covered and non-covered work for a single contractor. It provided that 
in order for a contractor to distinguish between an employee's covered 
and non-covered work (such as time spent performing work on or in 
connection with a covered contract versus time spent performing work on 
or in connection with non-covered contracts or time spent performing 
work on or in connection with a covered contract in the United States 
versus time spent performing work outside the United States, or to 
establish that time spent performing solely in connection with covered 
contracts constituted less than 20 percent of an employee's hours 
worked during a particular workweek), the contractor would be required 
to keep records or other proof reflecting such distinctions. It further 
provided that only if the contractor adequately segregated the 
employee's time would time spent on non-covered work be excluded from 
hours worked counted toward the accrual of paid sick leave, and that 
similarly, only if that contractor adequately segregated the employee's 
time could a contractor properly deny an employee's request to take 
leave under Sec.  13.5(d) on the ground that the employee was scheduled 
to perform non-covered work during the time he asked to use paid sick 
leave.
    The HR Policy Association and the ERISA Industry Committee 
commented that it would be difficult for covered contractors to 
implement Sec.  13.25(b) with respect to those employees that might be 
spending less than 20 percent of hours worked in a workweek in 
connection with covered contracts and sought a 1-year grace period for 
contractors to make necessary modifications to their human resource 
systems to enable compliance with the requirements of Sec.  13.25(b). 
EEAC and Seyfarth Shaw similarly expressed that tracking the hours of 
individuals working in connection with a covered contract would be 
challenging. The language in proposed Sec.  13.25(b) is consistent with 
the treatment of hours worked on SCA- and non-SCA-covered contracts, 
see 29 CFR 4.178, 4.179, as well as the treatment of covered versus 
non-covered time under the Minimum Wage Executive Order rulemaking, see 
79 FR 60659, 60660-61, 60672. Thus, many, if not most, covered 
contractors will have experience in segregating hours worked in the 
manner required by proposed Sec.  13.25(b). In addition, requiring 
contractors that wish to distinguish between covered and non-covered 
time to keep adequate records reflecting that distinction would 
implement section 4(a) of the Order because it would facilitate the 
Department's investigation of potential violations of, and assist in 
obtaining compliance with, the Order. For these reasons, the Department 
declines to provide the grace period requested by HR Policy Association 
and the ERISA Industry Committee and adopts Sec.  13.25(b) in the Final 
Rule as proposed. However, the Department has re-designated proposed 
Sec.  13.25(b) as subparagraph (1) in the Final Rule because of the 
insertion of subparagraph (2), described below.
    As explained above in the discussion of Sec.  13.5(a)(i) and (iii), 
the Department has amended those provisions in response to comments to 
allow contractors to estimate an employee's covered hours worked in 
connection with covered contracts provided that the estimate is 
reasonable and based on verifiable information. New Sec.  13.25(b)(2) 
reflects this change by providing that if a contractor estimates 
covered hours worked by an employee who performs work in connection 
with covered contracts pursuant to Sec.  13.5(a)(i) or (iii), the 
contractor must keep records or other proof of the verifiable 
information on which such estimates are reasonably based. It further 
provides that only if the contractor relies on an estimate that is 
reasonable and based on verifiable information will an employee's time 
spent in connection with non-covered contracts be excluded from hours 
worked counted toward the accrual of paid sick leave. Finally, the new 
regulatory text notes, as explained in the discussion of Sec.  
13.5(c)(1) above, that if a contractor estimates the amount of time an 
employee spends performing work in connection with covered contracts, 
the contractor must permit

[[Page 67660]]

the employee to use her paid sick leave during any work time for the 
contractor.
    Proposed Sec.  13.25(c) excused a contractor from maintaining 
records of the employee's number of daily and weekly hours worked as 
otherwise required under Sec.  13.25(a)(4) if the SCA, DBA, or FLSA do 
not require the contractor to keep records of the employee's hours 
worked, such as because the employee is employed in a bona fide 
executive, administrative, or professional capacity as those terms are 
defined in 29 CFR part 541, and the contractor elected to use the 
assumption permitted by Sec.  13.5(a)(1)(iii). The Department received 
no specific comments on proposed Sec.  13.25(c) and implements the 
provision without modification.
    Proposed Sec.  13.25(d) addressed requirements related to the 
confidentiality of records. Proposed Sec.  13.25(d)(1) required a 
contractor to maintain as confidential in separate files/records from 
the usual personnel files any records relating to medical histories or 
domestic violence, sexual assault, or stalking created by or provided 
to a contractor for purposes of Executive Order 13706, whether of an 
employee or an employee's child, parent, spouse, domestic partner, or 
other individual related by blood or affinity whose close association 
with the employee is the equivalent of a family relationship. Proposed 
Sec.  13.25(d)(2) required records or documents created to comply with 
the recordkeeping requirements in proposed part 13 that are subject to 
the confidentiality requirements of the Genetic Information 
Nondiscrimination Act of 2008 (GINA), Public Law 110-233, 122 Stat. 881 
(2008), and/or the Americans with Disabilities Act (ADA), 42 U.S.C. 
12101 et seq., to be maintained in compliance with the confidentiality 
requirements of those statutes as described in 29 CFR 1635.9 and 
1630.14(c)(1), respectively. Proposed Sec.  13.25(d)(3) prohibited the 
disclosure of any documentation used to verify the need to use 3 or 
more consecutive days of paid sick leave for the purposes listed in 
Sec.  13.5(c)(1)(iv), and required the contractor to maintain 
confidentiality about any domestic violence, sexual assault, or 
stalking, unless the employee consents or the disclosure is required by 
law.
    The Department has modified proposed Sec.  13.25(d)(2) to clarify 
that the confidentiality requirements of the GINA and the ADA apply to 
medical information contained in records or documents that a contractor 
creates or receives in connection with compliance with part 13. This 
modification aims to more clearly fulfill the intent of proposed Sec.  
13.25(d)(2), which was to ensure that to the extent compliance with the 
Order and its implementing regulations resulted in a contractor 
possessing documents to which the GINA and/or the ADA confidentiality 
requirements apply, the contractor must maintain those documents 
consistent with the GINA's and/or the ADA's confidentiality 
requirements. The Department received no specific comments related to 
proposed Sec.  13.25(d), and with the exception of this modification, 
the Department adopts Sec.  13.25(d) as proposed.
    Proposed Sec.  13.25(e) required contractors to permit authorized 
representatives of the WHD to conduct interviews with employees at the 
worksite during normal working hours. This provision was derived from 
similar provisions under the SCA and DBA, 29 CFR 4.6(g)(4) (SCA); 29 
CFR 5.5(a)(3)(iii) (DBA), and would facilitate the WHD's ability to 
enforce the Order and part 13. The Department received no comments 
related to proposed Sec.  13.25(e) and retains the provision as 
proposed.
    Proposed Sec.  13.25(f) stated that nothing in part 13 limits or 
otherwise modifies the contractor's recordkeeping obligations, if any, 
under the DBA, SCA, FLSA, FMLA, Executive Order 13658, their 
implementing regulations, or other applicable law. The Department 
received no comments regarding this provision and adopts it without 
change.
Certified List of Employees' Accrued Paid Sick Leave
    Proposed Sec.  13.26 required a predecessor prime contractor to 
provide to the contracting officer, upon completion of a covered 
contract, a certified list of the names of all employees entitled to 
paid sick leave under Executive Order 13706 and part 13 who worked on 
or in connection with the covered contract or any covered 
subcontract(s) at any point during the 12 months preceding the date of 
completion of the contract; the date each such employee separated from 
the contract or any covered subcontract(s) if prior to the date of the 
completion of the contract; and the amount of paid sick leave each such 
employee had available for use as of the date of completion of the 
contract or the date each such employee separated from the contract or 
subcontract. This requirement was intended to facilitate compliance by 
successor contractors with the requirement set forth in Sec.  
13.5(b)(4) that paid sick leave be reinstated for employees rehired by 
a successor contractor within 12 months of the job separation from the 
predecessor contractor. Because (for reasons explained above) that 
provision does not appear in the Final Rule, proposed Sec.  13.26 is no 
longer necessary and also does not appear in the Final Rule.
Section 13.26 Notice
    Proposed Sec.  13.27 addressed the obligations of contractors with 
respect to notice to employees of their rights under Executive Order 
13706 and part 13. Proposed Sec.  13.27(a) required that contractors 
notify all employees performing work on or in connection with a covered 
contract of the paid sick leave requirements of Executive Order 13706 
and part 13 by posting a notice provided by the Department of Labor in 
a prominent and accessible place at the worksite so it would be readily 
seen by employees. The Department derived this proposal from the 
Executive Order 13658 Final Rule at 29 CFR 10.29(b). 79 FR 60670. This 
proposal differed from the Minimum Wage Executive Order regulations, 
however, in that it required all covered contractors, including those 
whose contracts are DBA- or SCA-covered, to display the poster rather 
than allowing DBA and SCA contractors to provide notice solely on wage 
determinations. This difference was based on the Department's belief 
that, because the Order's paid sick leave requirements require 
lengthier explanation than the minimum wage requirements of Executive 
Order 13658, and because those requirements are sufficiently detailed 
such that the Department did not propose to describe them in full on 
wage determinations, employees working on or in connection with DBA- 
and SCA-covered contracts would be more adequately informed about the 
paid sick leave requirements by a poster. The Department stated in the 
NPRM that it would make a poster, modeled on the Minimum Wage Executive 
Order poster, available on the WHD Web site.
    Numerous commenters, including Voices for Vermont's Children, 
USAction, the NYC Department of Consumer Affairs, and NETWORK, 
supported the requirement that contractors prominently post notices 
regarding paid sick leave for employees to see. The National 
Partnership suggested that the Department additionally require 
contractors to provide employees with individual written notice of the 
paid sick leave requirements, either when they begin employment with 
the contractor or as soon as practicable if they are already employed. 
The Department declines to adopt this suggestion because it believes 
the notice poster and notification of paid sick leave accrual 
requirements in Sec.  13.5(a)(2) will suffice to inform

[[Page 67661]]

employees that they are entitled to paid sick leave. The Department 
therefore adopts Sec.  13.27(a) as proposed, except that it appears in 
the Final Rule as Sec.  13.26(a) because of the removal of proposed 
Sec.  13.26 as explained above.
    Proposed Sec.  13.27(b), derived from the Executive Order 13658 
Final Rule at 29 CFR 10.29(c), permitted contractors that customarily 
post notices to employees electronically to post the notice 
electronically, provided such electronic posting is displayed 
prominently on any Web site maintained by the contractor, whether 
external or internal, and is customarily used for notices to employees 
about terms and conditions of employment. The Department received no 
specific comments on proposed Sec.  13.27(b) and retains the section in 
its proposed form, except that it appears in the Final Rule as Sec.  
13.26(b).
Section 13.27 Timing of Pay
    Proposed Sec.  13.28 described the time by which a contractor must 
compensate employees for hours during which they used paid sick leave. 
Under the proposed provision, a contractor was required to provide such 
compensation no later than one pay period following the end of the 
regular pay period in which the paid sick leave was used. The proposed 
timing of the payment obligation imposed was consistent with both the 
SCA's and Executive Order 13658's implementing regulations. See 29 CFR 
4.165(a) (SCA); 29 CFR 10.25 (Executive Order 13658). The Department 
received no specific comments on proposed Sec.  13.28 and accordingly 
adopts the provision without change, except that it appears in the 
Final Rule as Sec.  13.27 because of the removal of proposed Sec.  
13.26.
Subpart D--Enforcement
    Subpart D implements section 4 of Executive Order 13706, which 
grants the Secretary ``authority for investigating potential violations 
of and obtaining compliance with the order,'' 80 FR 54699, by setting 
forth remedies, procedures, and enforcement processes. Subpart D is 
largely based on subpart D of the Minimum Wage Executive Order 
regulations in 29 CFR part 10, which incorporated relevant regulatory 
provisions under the FLSA, SCA, and DBA, as well as certain enforcement 
procedures set forth in the Department's regulations implementing the 
Nondisplacement Executive Order. Subpart D differs in some respects 
from the analogous provisions in the Minimum Wage Executive Order 
regulations because of the differences between minimum wage and paid 
sick leave requirements and because Executive Order 13706 contemplates 
that the Department would also incorporate FMLA provisions to the 
extent practicable.
    Subpart D establishes a procedure for filing complaints with the 
WHD, creates an informal complaint resolution process between the WHD 
and parties alleged to be in violation of the Order, details the WHD's 
investigation procedures under the Order, and provides remedies and 
sanctions for violations of the Order, including monetary relief, 
liquidated damages, and debarment, as well as processes for collection 
of underpayments. As noted in the NPRM, the Department believes subpart 
D will facilitate investigations of potential violations of the Order, 
allow for violations of the Order to be addressed and remedied, and 
promote compliance with the Order. The Department received numerous 
comments generally supporting the proposed enforcement provisions as 
reasonable, strong, and critical to protecting workers' rights and 
discouraging violation of the law; as explained in more detail below, 
the Department is adopting subpart D as proposed.
Section 13.41 Complaints
    The Department proposed a procedure for filing complaints in Sec.  
13.41 identical to that which appears in 29 CFR 10.41, the analogous 
section of the Minimum Wage Executive Order Final Rule. Proposed Sec.  
13.41(a) provided that any employee, contractor, labor organization, 
trade organization, contracting agency, or other person or entity that 
believes a violation of the Executive Order or part 13 has occurred 
could file a complaint with any office of the WHD. It also provided 
that no particular form of complaint is required; a complaint could be 
filed orally or in writing, and WHD would accept a complaint in any 
language if the complainant was unable to file it in English. Proposed 
Sec.  13.41(b) stated the well-established policy of the Department 
with respect to confidential sources. See 29 CFR 4.191(a); 29 CFR 
5.6(a)(5). Specifically, it provided that it is the Department's policy 
to protect the identity of its confidential sources and to prevent an 
unwarranted invasion of personal privacy. Accordingly, the provision 
stated that the identity of any individual who makes a written or oral 
statement as a complaint or in the course of an investigation, as well 
as portions of the statement which would reveal the individual's 
identity, would not be disclosed in any manner to anyone other than 
Federal officials without the prior consent of the individual. The 
proposed provision further provided that disclosure of such statements 
would be governed by the provisions of the Freedom of Information Act, 
5 U.S.C. 552, 29 CFR part 70, and the Privacy Act of 1974, 5 U.S.C. 
552. Many commenters, including Jobs With Justice, Demos, Women 
Employed, the National Hispanic Council on Aging, and the National 
Employment Lawyers Association (NELA), generally supported allowing 
employees to file complaints with the WHD. No commenter suggested any 
change to this provision, and the Department adopts it as proposed.
Section 13.42 Wage and Hour Division Conciliation
    Proposed Sec.  13.42, which was identical to 29 CFR 10.42, 
established an informal complaint resolution process for complaints 
filed with the WHD. The provision allowed the WHD, after obtaining the 
necessary information from the complainant regarding the alleged 
violations, to contact the party against whom the complaint was lodged 
and attempt to reach an acceptable resolution through conciliation. The 
Department received no comments regarding this provision and adopts 
Sec.  13.42 without modification.
Section 13.43 Wage and Hour Division Investigation
    Proposed Sec.  13.43, which outlined the WHD's investigative 
authority, was identical to 29 CFR 10.43. That section of the Minimum 
Wage Executive Order Final Rule was derived primarily from regulations 
implementing the SCA and DBA. See 79 FR 60679 (citing 29 CFR 4.6(g)(4), 
29 CFR 5.6(b)). Proposed Sec.  13.43 permitted the Administrator to 
initiate an investigation either as the result of a complaint or at any 
time on his or her own initiative. Under the proposal, as part of the 
investigation, the Administrator was entitled to conduct interviews 
with the contractor, as well as the contractor's employees at the 
worksite during normal work hours; inspect the relevant contractor's 
records (including contract documents and payrolls, if applicable); 
make copies and transcriptions of such records; and require the 
production of any documentary or other evidence the Administrator deems 
necessary to determine whether a violation, including conduct 
warranting imposition of debarment, has occurred. The proposed section 
also required Federal agencies and contractors to cooperate with 
authorized representatives of the Department in the

[[Page 67662]]

inspection of records, in interviews with employees, and in all aspects 
of investigations. The Department received no comments requesting any 
change to this provision and therefore implements it as proposed.
Section 13.44 Remedies and Sanctions
    In proposed Sec.  13.44, the Department set forth remedies and 
sanctions for violations of the Order and part 13. Proposed Sec.  
13.44(a) provided for remedies for violations of the prohibition on 
interference with the accrual or use of paid sick leave described in 
Sec.  13.6(a). Proposed Sec.  13.44(a) provided that when the 
Administrator determines that a contractor has interfered with an 
employee's accrual or use of the paid sick leave in violation of Sec.  
13.6(a), the Administrator would notify the contractor and the relevant 
contracting agency of the interference and request the contractor to 
remedy the violation. It additionally proposed that if the contractor 
does not remedy the violation, the Administrator would direct the 
contractor to provide any appropriate relief to the affected 
employee(s) in the Administrator's investigation findings letter issued 
pursuant to Sec.  13.51. The Department further proposed that such 
relief may include any pay and/or benefits denied or lost by reason of 
the violation; other actual monetary losses sustained as a direct 
result of the violation; or appropriate equitable or other relief. 
Proposed relief also included an amount equaling any monetary relief as 
liquidated damages unless such amount was reduced by the Administrator 
because the violation was in good faith and the contractor had 
reasonable grounds for believing it had not violated the Order or part 
13. The types of relief available under proposed Sec.  13.44(a) were 
derived from the FMLA, 29 U.S.C. 2617(a)(1), 2617(b)(2), and its 
implementing regulations, 29 CFR 825.400(c). Important aspects of these 
FMLA remedies, such as the inclusion of liquidated damages, are also 
part of the FLSA scheme. See 29 U.S.C. 216(b), 260. As noted in the 
NPRM, under the FLSA and FMLA--and by extension, under Executive Order 
13706 and part 13--liquidated damages serve the purpose of compensating 
employees for the delay in receiving wages owed rather than punishing 
the employer who violated the statute. See, e.g., Herman v. RSR Sec. 
Servs. Ltd., 172 F.3d 132, 142 (2d Cir. 1999) (FLSA); Jordan v. U.S. 
Postal Serv., 379 F.3d 1196, 1202 (10th Cir. 2004) (FMLA).
    As the Department explained in the NPRM, under the regulatory text, 
an example of a possible remedy includes payment for time for which a 
contractor improperly denied a request to use paid sick leave such that 
the employee took unpaid leave that should have been treated as paid 
sick leave. In that case, the damages would be the pay and benefits the 
employee would have received for that time pursuant to Sec.  
13.5(c)(3), and the award would include an equal amount of liquidated 
damages unless the violation was made in good faith and the contractor 
had reasonable grounds for believing it had not violated the Order or 
part 13. As another example, if a contractor improperly denied a 
request to use paid sick leave such that an employee came to work and 
hired a babysitter to care for a sick child with whom the employee 
wished to stay home, the remedy would be the amount the employee spent 
on the child care, and the award would include an equal amount of 
liquidated damages unless the violation was made in good faith and the 
contractor had reasonable grounds for believing it had not violated the 
Order or part 13. In this example, relief would not include lost pay or 
benefits because the employee did not lose pay or benefits due to the 
violation. The Department stated in the NPRM that equitable relief 
could include, but was not limited to, requiring the contractor to 
allow for accrual and use of paid sick leave by an employee it 
erroneously treated as not covered by the Executive Order or requiring 
the contractor to restore paid sick leave it improperly deducted from 
an employee's accrued paid sick leave.
    Many commenters, including the NYC Department of Consumer Affairs, 
the Seattle Office of Labor Standards, NELP, the Coalition on Human 
Needs, and CLASP, supported including liquidated damages as a remedy 
for violations of the Order. EEAC, however, opposed the Department's 
proposal to allow for liquidated damages, noting that the Order directs 
that its implementing regulations should incorporate remedies from the 
Minimum Wage Executive Order rulemaking, which does not provide for 
liquidated damages.
    After careful consideration, the Department will not follow EEAC's 
suggestion to remove liquidated damages as an available remedy for 
violations of the Order and part 13. The Executive Order requires the 
Department to incorporate procedures and remedies not solely from the 
Minimum Wage Executive Order rulemaking, but also the FLSA and, 
notably, the FMLA, and as explained above, those statutes provide for 
liquidated damages. Furthermore, monetary relief for violations of the 
Order and part 13 will often be limited because the monetary value of 
paid sick leave is limited. Liquidated damages in the amount of any 
monetary relief is therefore an important mechanism for ensuring that 
employees who suffer violations are adequately compensated.
    Proposed Sec.  13.44(a) also provided that the Administrator could 
direct that payments due on the contract or any other contract between 
the contractor and the Federal Government be withheld as may be 
necessary to provide any appropriate monetary relief, and that, upon 
the final order of the Secretary that monetary relief is due, the 
Administrator could direct the relevant contracting agency to transfer 
the withheld funds to the Department for disbursement. These portions 
of the proposed provision were identical to language in the Minimum 
Wage Executive Order Final Rule. See 29 CFR 10.44(a). The Department 
received no comments regarding this portion of the proposed provision. 
For the reasons explained, the Department adopts Sec.  13.44(a) as 
proposed.
    Proposed Sec.  13.44(b) set out remedies for violations of the 
prohibition on discrimination in Sec.  13.6(b). It provided that when 
the Administrator determines that a contractor has discriminated 
against an employee in violation of Sec.  13.6(b), the Administrator 
would notify the contractor and the relevant contracting agency of the 
discrimination and request that the contractor remedy the violation. It 
further provided that if the contractor does not remedy the violation, 
the Administrator would direct the contractor to provide any 
appropriate relief, including but not limited to employment, 
reinstatement, promotion, restoration of leave, or lost pay and/or 
benefits, in the Administrator's investigation findings letter issued 
pursuant to Sec.  13.51. As proposed, Sec.  13.44(b) also provided that 
an amount equaling any monetary relief could be awarded as liquidated 
damages unless such amount is reduced by the Administrator because the 
violation was in good faith and the contractor had reasonable grounds 
for believing the contractor had not violated the Order or part 13. 
This language was derived from the FMLA remedies set forth in 29 U.S.C. 
2617(a)(1) and 29 CFR 825.400(c); see also 29 U.S.C. 2617(b)(2). It was 
similar to the analogous provision in the Minimum Wage Executive Order 
rulemaking, 79 FR 60728 (codified at 29 CFR 10.44(b)), which was 
derived from the remedies provided for under the FLSA's anti-
retaliation provision, see 29 U.S.C. 216(b), except that the proposed 
provision allowed for liquidated

[[Page 67663]]

damages, a remedy available under the FMLA, 29 U.S.C. 2617(a)(1), and 
the FLSA, 29 U.S.C. 216(b), 260. Proposed Sec.  13.44(b) further noted 
that the Administrator could additionally direct that payments due on 
the contract or any other contract between the contractor and the 
Federal Government be withheld as may be necessary to provide any 
appropriate monetary relief and that upon the final order of the 
Secretary that monetary relief is due, the Administrator could direct 
the relevant contracting agency to transfer the withheld funds to the 
Department of Labor for disbursement. Comments supporting and opposing 
the inclusion of liquidated damages in Sec.  13.44(a) also apply to 
Sec.  13.44(b), and for the reasons described above, the Department is 
continuing to allow for that remedy. Accordingly, this provision is 
implemented as proposed.
    Proposed Sec.  13.44(c) addressed the remedies for violations of 
the recordkeeping requirements in subpart C. It provided that when a 
contractor fails to comply with the requirements of Sec.  13.25 in 
violation of Sec.  13.6(c), the Administrator would request that the 
contractor remedy the violation. Proposed Sec.  13.44(c) further 
provided that if a contractor fails to produce required records upon 
request, the contracting officer, upon direction of an authorized 
representative of the Department of Labor, or under its own action, 
would take such action as necessary to cause suspension of any further 
payment or advance of funds on the contract until such time as the 
violations are discontinued. PSC asserted that it would be unreasonable 
to suspend contract payments simply because a contractor failed to 
produce records upon request. The Department declines to modify 
proposed Sec.  13.44(c) because any such suspension would end when the 
recordkeeping violations are discontinued, and because the section is 
consistent with and was derived from paragraph (g)(3) of the Minimum 
Wage Executive Order contract clause, 79 FR 60731, the analogous 
provision of the SCA regulations, 29 CFR 4.6(g)(3), and the analogous 
provision of the DBA regulations, 29 CFR 5.5(a)(3)(iii). The Department 
therefore adopts this provision without change other than the insertion 
of a reference to a guarantee of funds for the reasons explained in the 
discussion of Sec.  13.11(c).
    Proposed Sec.  13.44(d), which was effectively identical to the 
corresponding provision in the Minimum Wage Executive Order rulemaking, 
29 CFR 10.44(c), allowed for the remedy of debarment. Specifically, it 
provided that whenever a contractor is found by the Secretary to have 
disregarded its obligations under Executive Order 13706 or part 13, 
such contractor and its responsible officers, and any firm, 
corporation, partnership, or association in which the contractor or 
responsible officers have an interest, would be ineligible to be 
awarded any contract or subcontract subject to the Executive Order for 
a period of up to 3 years from the date of publication of the name of 
the contractor or responsible officer on the excluded parties list 
currently maintained on the System for Award Management Web site, 
http://www.SAM.gov. The ``disregarded its obligations'' standard, which 
is also used in the Minimum Wage Executive Order rulemaking, was 
derived from the DBA implementing regulations at 29 CFR 5.12(a)(2). See 
79 FR 60680. Proposed Sec.  10.44(d) further provided that neither an 
order of debarment of any contractor or its responsible officers from 
further Government contracts nor the inclusion of a contractor or its 
responsible officers on a published list of noncomplying contractors 
under this section would be carried out without affording the 
contractor or responsible officers an opportunity for a hearing before 
an Administrative Law Judge (ALJ).
    Debarment is a long-established remedy for a contractor's failure 
to fulfill its labor standards obligations under the SCA and the DBA, 
see 41 U.S.C. 6706(b); 40 U.S.C. 3144(b); 29 CFR 4.188(a); 29 CFR 
5.5(a)(7); 29 CFR 5.12(a)(2), and one that, as noted, was adopted in 
the Minimum Wage Executive Order rulemaking, see 79 FR 60728 (codified 
at 29 CFR 10.44(c)). In the NPRM, the Department explained that the 
possibility that a contractor will be unable to obtain Government 
contracts for a fixed period of time due to debarment promotes 
contractor compliance with the SCA, DBA, and Minimum Wage Executive 
Order, and the Department intended inclusion of the remedy in the NPRM 
to incentivize compliance with Executive Order 13706 as well.
    A Better Balance, Innovation Ohio, the National Partnership, Equal 
Rights Advocates, CPD, and numerous other commenters endorsed the 
debarment of contractors found to have violated the Order and part 13 
as an appropriate remedy. The Department therefore implements Sec.  
13.44(d) as proposed.
    Proposed Sec.  13.44(e) allowed for initiation of an action, 
following a final order of the Secretary, against a contractor in any 
court of competent jurisdiction to collect underpayments when the 
amounts withheld under Sec.  13.11(c) are insufficient to reimburse all 
monetary relief due. Proposed Sec.  13.44(e) also authorized initiation 
of an action, following the final order of the Secretary, in any court 
of competent jurisdiction when there are no payments available to 
withhold. Such circumstances could arise, for example, if at the time 
the Administrator discovers a contractor owes monetary relief to 
employees, no payments remain owing under the contract or another 
contract between the same contractor and the Federal Government, or if 
the covered contract is a concessions contract under which the 
contractor does not receive payments from the Federal Government. 
Proposed Sec.  13.44(e) additionally provided that any sums the 
Department recovers would be paid to affected employees to the extent 
possible, but that sums not paid to employees because of an inability 
to do so within 3 years would be transferred into the Treasury of the 
United States. Proposed Sec.  13.44(e) was derived from the analogous 
provision of the Minimum Wage Executive Order rulemaking, 29 CFR 
10.44(d), which in turn was derived from the SCA, 41 U.S.C. 6705(b)(2). 
No comments addressed this provision specifically and the Department 
adopts it as proposed.
    In proposed Sec.  13.44(f), the Department addressed what remedy 
would be available when a contracting agency fails to include the 
contract clause in a contract subject to the Executive Order. It 
provided that the contracting agency, on its own initiative or within 
15 calendar days of notification by the Department, would incorporate 
the clause in the contract retroactive to commencement of performance 
under the contract through the exercise of any and all authority that 
may be needed (including, where necessary, its authority to negotiate 
or amend, its authority to pay any necessary additional costs, and its 
authority under any contract provision authorizing changes, 
cancellation, and termination). This provision was identical to 29 CFR 
10.44(e); in promulgating that provision during the Minimum Wage 
Executive Order rulemaking, the Department explained that this clause 
would provide the Administrator authority to collect underpayments on 
behalf of affected employees on the applicable contract retroactive to 
commencement of performance under the contract. 79 FR 60681. The 
Department also noted in that rulemaking that the Administrator 
possesses comparable authority under the DBA. Id. (citing 29 CFR 
1.6(f)). The Department explained in the NPRM that a mechanism for 
addressing a failure to

[[Page 67664]]

include the contract clause in a contract subject to Executive Order 
13706 would further the interest in both remedying violations and 
obtaining compliance with the Order, as it did with respect to the 
Minimum Wage Executive Order. Furthermore, as also noted in the Minimum 
Wage Executive Order rulemaking, the proposed provision included 
language reflecting the Department's belief that a contractor is 
entitled to an adjustment where necessary to pay any necessary 
additional costs when a contracting agency initially omits and then 
subsequently includes the contract clause in a covered contract. Id. 
(citing 29 CFR 4.5(c), the SCA regulation with which this position is 
consistent). As noted above, PSC requested that the Department 
expressly require a price or cost adjustment when a contracting agency 
fails to include the contract clause in a covered contract. For the 
reasons explained in the discussion of Sec.  13.11(b), Sec.  13.44(f) 
is implemented without change.
Subpart E--Administrative Proceedings
    Pursuant to section 4 of Executive Order 13706, subpart E 
establishes and describes the administrative proceedings to be 
conducted under the Order. In compliance with section 3(c) of the 
Order, proposed subpart E incorporates, to the extent practicable, the 
DBA, SCA, and Executive Order 13658 administrative procedures the 
Department believes are necessary to remedy potential violations and 
ensure compliance with the Executive Order. Indeed, the Department 
substantially modeled subpart E on subpart E of the Minimum Wage 
Executive Order Final Rule, which was primarily derived from the rules 
governing administrative proceedings conducted under the DBA and SCA. 
79 FR 60682. The administrative procedures included in subpart E also 
closely adhere to existing procedures of the Department's Office of 
Administrative Law Judges and Administrative Review Board (ARB).
Section 13.51 Disputes Concerning Contractor Compliance
    Proposed Sec.  13.51, which the Department derived primarily from 
the DBA's implementing regulations at 29 CFR 5.11, addressed how the 
Administrator would process disputes regarding a contractor's 
compliance with part 13. Specifically, proposed Sec.  13.51(a) provided 
that the Administrator or a contractor could initiate a proceeding. The 
Department received no comments regarding this provision, and it is 
adopted as proposed.
    Proposed Sec.  13.51(b)(1) provided that when it appears that 
relevant facts are at issue in a dispute covered by Sec.  13.51(a), the 
Administrator would notify the affected contractor(s) and the prime 
contractor, if different, of the investigative findings by certified 
mail to the last known address. The preamble to the proposal further 
stated that if the Administrator determines that there are reasonable 
grounds to believe the contractor(s) should be subject to debarment, 
the investigative findings letter would so indicate. Proposed Sec.  
13.51(b)(2) required a contractor desiring a hearing concerning the 
investigative findings letter to request a hearing by letter postmarked 
within 30 calendar days of the date of the Administrator's letter. It 
further required the request to set forth those findings in dispute 
with respect to the violation(s) and/or debarment, as appropriate, and 
to explain how such findings are in dispute, including by reference to 
any applicable affirmative defenses.
    Proposed Sec.  13.51(b)(3) required the Administrator, upon receipt 
of a timely request for hearing, to refer the matter to the Chief 
Administrative Law Judge by Order of Reference for designation of an 
ALJ to conduct such hearings as may be necessary to resolve the 
disputed matter in accordance with the procedures set forth in 29 CFR 
part 6. It also required the Administrator to attach a copy of the 
Administrator's letter, and the response thereto, to the Order of 
Reference that the Administrator sent to the Chief Administrative Law 
Judge.
    The Department did not receive any requests to alter Sec.  13.51(b) 
and implements it as proposed.
    Proposed Sec.  13.51(c)(1) applied in circumstances when it appears 
there are no relevant facts at issue and there is not at that time 
reasonable cause to institute debarment proceedings. It required the 
Administrator to notify the contractor, by certified mail to the 
contractor's last known address, of the investigative findings and to 
issue a ruling on any issues of law known to be in dispute.
    Proposed Sec.  13.51(c)(2)(i) applied when a contractor disagrees 
with the Administrator's factual findings or believes there are 
relevant facts in dispute. It required the contractor to advise the 
Administrator of such disagreement by letter postmarked within 30 
calendar days of the date of the Administrator's letter. Under the 
NPRM, the contractor was also required to explain in detail the facts 
alleged to be in dispute and attach any supporting documentation with 
its response.
    Proposed Sec.  13.51(c)(2)(ii) required that the information 
submitted in the response alleging the existence of a factual dispute 
must be timely in order for the Administrator to examine such 
information. Under the NPRM, where the Administrator determined there 
was a relevant issue of fact, the Administrator would refer the case to 
the Chief Administrative Law Judge. If the Administrator determined 
there was no relevant issue of fact, the Administrator would so rule 
and advise the contractor accordingly.
    Proposed Sec.  13.51(c)(3) applied where a contractor desires 
review of a ruling issued by the Administrator under proposed Sec.  
13.51(c)(1) or the final sentence of proposed Sec.  13.51(c)(2)(ii). It 
required a contractor to file any petition for review with the ARB 
postmarked within 30 calendar days of the Administrator's ruling, with 
a copy thereof to the Administrator. It further required the petitioner 
to file its petition in accordance with the procedures set forth in 29 
CFR part 7.
    The Department received no comments addressing Sec.  13.51(c) and 
adopts it without modification.
    Proposed Sec.  13.51(d) provided that the Administrator's 
investigative findings letter would become the final order of the 
Secretary if a timely response to the letter is not made or a timely 
petition for review is not filed. It additionally provided that if a 
timely response or a timely petition for review is filed, the 
investigative findings letter would be inoperative unless and until the 
decision is upheld by an ALJ or the ARB, or the letter otherwise 
becomes a final order of the Secretary. No comments addressed Sec.  
13.51(d), and the Department implements it as proposed.
Section 13.52 Debarment Proceedings
    Proposed Sec.  13.52 addressed debarment proceedings and was 
identical to the analogous provision in the Minimum Wage Executive 
Order regulations, 29 CFR 10.52, which the Department primarily derived 
from the DBA implementing regulations at 29 CFR 5.12. 79 FR 60683. 
Proposed Sec.  13.52(a) provided that whenever any contractor is found 
by the Secretary of Labor to have disregarded its obligations to 
employees or subcontractors under Executive Order or part 13, such 
contractor and its responsible officers, and any firm, corporation, 
partnership, or association in which such contractor or responsible 
officers have an interest, would be ineligible for a period of up to 3 
years to receive any contracts or subcontracts subject to the Executive 
Order from the date of publication of the name or names of the 
contractor or

[[Page 67665]]

persons on the excluded parties list currently maintained on the System 
for Award Management Web site, http://www.SAM.gov. The Department 
received no comments addressing this provision and adopts it as 
proposed.
    Proposed Sec.  13.52(b)(1) provided that where the Administrator 
finds reasonable cause to believe a contractor has committed a 
violation of the Executive Order or part 13 that constitutes a 
disregard of its obligations to its employees or subcontractors, the 
Administrator would notify, by certified mail to the last known 
address, the contractor and its responsible officers (and any firms, 
corporations, partnerships, or associations in which the contractor or 
responsible officers are known to have an interest) of the finding. 
Under proposed Sec.  13.52(b)(1), the Administrator would additionally 
furnish those notified a summary of the investigative findings and 
afford them an opportunity for a hearing regarding the debarment issue. 
Those notified would have to request a hearing on the debarment issue, 
if desired, by letter to the Administrator postmarked within 30 
calendar days of the date of the letter from the Administrator. The 
letter requesting a hearing would need to set forth any findings that 
were in dispute and the reasons therefore, including any affirmative 
defenses to be raised.
    Proposed Sec.  13.52(b)(1) also required the Administrator, upon 
receipt of a timely request for hearing, to refer the matter to the 
Chief Administrative Law Judge by Order of Reference, to which would be 
attached a copy of the Administrator's investigative findings letter 
and the response thereto, for designation to an ALJ to conduct such 
hearings as may be necessary to determine the matters in dispute. 
Proposed Sec.  13.52(b)(2) provided that hearings under Sec.  13.52 
would be conducted in accordance with 29 CFR part 6. Under the 
proposal, if no timely request for hearing was received, the 
Administrator's findings would become the final order of the Secretary.
    The Department did not receive any comments regarding Sec.  
13.52(b) and implements the provision as proposed.
Section 13.53 Referral to Chief Administrative Law Judge; Amendment of 
Pleadings
    Proposed Sec.  13.53, as well as proposed Sec. Sec.  13.54-13.57, 
were largely identical to the corresponding provisions in the Minimum 
Wage Executive Order rulemaking, 29 CFR 10.53-10.57, and were derived 
from the SCA and DBA rules of practice for administrative proceedings 
contained in 29 CFR part 6. Proposed Sec.  13.53(a) provided that upon 
receipt of a timely request for a hearing under proposed Sec.  13.51 
(where the Administrator has determined that relevant facts are in 
dispute) or proposed Sec.  13.52 (debarment), the Administrator would 
refer the case to the Chief Administrative Law Judge by Order of 
Reference, to which would be attached a copy of the investigative 
findings letter from the Administrator and the response thereto, for 
designation of an ALJ to conduct such hearings as may be necessary to 
decide the disputed matters. It further provided that a copy of the 
Order of Reference and attachments thereto would be served upon the 
respondent and that the investigative findings letter and the response 
thereto would be given the effect of a complaint and answer, 
respectively, for purposes of the administrative proceeding.
    Proposed Sec.  13.53(b) stated that at any time prior to the 
closing of the hearing record, the complaint or answer could be amended 
with permission of the ALJ upon such terms as the ALJ approves, and 
that for proceedings initiated pursuant to proposed Sec.  13.51, such 
an amendment could include a statement that debarment action is 
warranted under proposed Sec.  13.52. It further provided that such 
amendments would be allowed when justice and the presentation of the 
merits are served thereby, provided no prejudice to the objecting 
party's presentation on the merits would result. It additionally stated 
that when issues not raised by the pleadings were reasonably within the 
scope of the original complaint and were tried by express or implied 
consent of the parties, they would be treated as if they had been 
raised in the pleadings, and such amendments could be made as necessary 
to make them conform to the evidence. Proposed Sec.  13.53(b) further 
provided that the presiding ALJ could, upon reasonable notice and upon 
such terms as are just, permit supplemental pleadings setting forth 
transactions, occurrences, or events that have happened since the date 
of the pleadings and that are relevant to any of the issues involved. 
It also authorized the ALJ to grant a continuance in the hearing, or 
leave the record open, to enable the new allegations to be addressed. 
The Department received no comments addressing this provision and 
implements it as proposed.
Section 13.54 Consent Findings and Order
    Proposed Sec.  13.54(a) provided that parties could at any time 
prior to the ALJ's receipt of evidence or, at the ALJ's discretion, at 
any time prior to issuance of a decision, agree to dispose of the 
matter, or any part thereof, by entering into consent findings and an 
order disposing of the proceeding. Proposed Sec.  13.54(b) provided 
that any agreement containing consent findings and an order disposing 
of a proceeding in whole or in part would also provide: (1) That the 
order would have the same force and effect as an order made after full 
hearing; (2) that the entire record on which any order may be based 
must consist solely of the Administrator's findings letter and the 
agreement; (3) a waiver of any further procedural steps before the ALJ 
and the ARB regarding those matters which are the subject of the 
agreement; and (4) a waiver of any right to challenge or contest the 
validity of the findings and order entered into in accordance with the 
agreement. Proposed Sec.  13.54(c) provided that within 30 calendar 
days of receipt of any proposed consent findings and order, the ALJ 
would accept the agreement by issuing a decision based on the agreed 
findings and order, provided the ALJ is satisfied with the proposed 
agreement's form and substance. It further provided that if the 
agreement disposes of only a part of the disputed matter, a hearing 
would be conducted on the matters remaining in dispute. The Department 
received no comments addressing this provision, and it adopts Sec.  
13.54 as proposed.
Section 13.55 Proceedings of the Administrative Law Judge
    Proposed Sec.  13.55 addressed the ALJ's proceedings and decision. 
Proposed Sec.  13.55(a) provided that the Office of Administrative Law 
Judges has jurisdiction to hear and decide appeals concerning questions 
of law and fact from the Administrator's investigative findings letters 
issued under Sec.  13.51 and/or Sec.  13.52. The Department received no 
comments related to proposed Sec.  13.55(a) and accordingly adopts the 
section in its proposed form.
    Proposed Sec.  13.55(b) provided that each party could file with 
the ALJ proposed findings of fact, conclusions of law, and a proposed 
order, together with a supporting brief expressing the reasons for such 
proposals, within 20 calendar days of filing of the transcript (or a 
longer period if the ALJ permits). It also provided that each party 
would serve such documents on all other parties. No comments addressed 
Sec.  13.55(b), and the Department adopts it as proposed.
    Proposed Sec.  13.55(c)(1) required an ALJ to issue a decision 
within a reasonable period of time after receipt of the proposed 
findings of fact, conclusions of law, and order, or within

[[Page 67666]]

30 calendar days after receipt of an agreement containing consent 
findings and an order disposing of the matter in whole. It further 
provided that the decision would contain appropriate findings, 
conclusions of law, and an order and be served upon all parties to the 
proceeding. Proposed Sec.  13.55(c)(2) provided that if the 
Administrator requests debarment, and the ALJ concludes the contractor 
has violated the Executive Order or part 13, the ALJ would issue an 
order regarding whether the contractor is subject to the excluded 
parties list that would include any findings related to the 
contractor's disregard of its obligations to employees or 
subcontractors under the Executive Order or part 13. The Department 
received no comments related to proposed Sec.  13.55(c) and adopts it 
without modification.
    Proposed Sec.  13.55(d) provided that the Equal Access to Justice 
Act (EAJA), as amended, 5 U.S.C. 504, does not apply to proceedings 
under part 13 because such proceedings were not required by an 
underlying statute to be determined on the record after an opportunity 
for an agency hearing. Therefore, the Department reasoned that an ALJ 
had no authority to award attorney's fees and/or other litigation 
expenses pursuant to the provisions of the EAJA for any proceeding 
under part 13.
    NELA commented that the rule would be strengthened by adding 
language to allow prevailing employees represented by private counsel 
to recover attorney's fees and costs in administrative proceedings 
brought to enforce and remedy violations of the Order. NELA expressed 
the view that the financial loss to a full-time employee who has not 
been permitted to accrue or use up to 56 hours per year of paid sick 
leave as required under the Order is likely to be minimal, and that 
without the ability to recover attorney's fees and costs, it would not 
be financially feasible for an employee to retain private counsel, or 
economically viable for a private attorney to represent an employee in 
this type of complaint.
    After careful consideration of this comment, the Department has 
decided to retain Sec.  13.55(d) as proposed. Although the Department 
agrees that promoting legal representation for employees is a worthy 
objective, the Department declines to adopt the recommendation to add 
language to permit the recovery of attorney's fees and costs by 
prevailing employees in administrative proceedings brought pursuant to 
these regulations. The American Rule governing the recovery of 
attorney's fees ordinarily requires litigants in court to bear their 
own fees and costs, regardless whether they win or lose. See Buckhannon 
Bd. & Care Home, Inc. v. West Va. Dep't of Health & Human Res., 532 
U.S. 598, 602 (2001). A prevailing party may be entitled to collect 
fees from the losing party only pursuant to explicit statutory 
authority. See Key Tronic Corp. v. United States, 511 U.S. 809, 819 
(1994); In the Matter of Ann P. Harris v. Tennessee Valley Authority, 
ARB Case No. 99-004, 2000 WL 2804643, at *3-7 (DOL Adm. Rev. Bd. Nov. 
29, 2000) (same, in administrative proceedings before Department of 
Labor ALJs or the ARB). Not only does the Order not contain any such 
explicit authority, it also specifies that it does not create, and is 
not intended to create, any right or benefit, substantive or 
procedural, enforceable at law or in equity by any party against the 
government or any other person. 80 FR 54699. Rather, pursuant to 
subpart E, where the Administrator finds that a violation of the Order 
or part 13 has occurred, the WHD shall initiate an enforcement 
proceeding, and an employee may participate in, but cannot be a party 
to, such a proceeding under the Order, and therefore would not be a 
``prevailing party'' for purposes of fee-shifting even if monetary or 
other relief were awarded.
    Lastly, Sec.  13.44 sets forth remedies and sanctions for 
violations of the Order. Relief may include any pay and/or benefits 
denied or lost by reason of the violation, other monetary losses 
sustained as a direct result of the violation, or appropriate equitable 
or other relief, as well as, in certain circumstances, payment of 
liquidated damages in an amount equaling any monetary relief. The 
Department believes these remedies provide adequate restitution to 
employees for violations of the Order, and that the inability of 
affected employees to recover attorney's fees and costs does not 
represent an impediment to enforcement of Executive Order 13706.
    Proposed Sec.  13.55(e) provided that if an ALJ concludes that a 
violation of the Executive Order or part 13 occurred, the final order 
would mandate action to remedy the violation, including any monetary or 
equitable relief described in Sec.  13.44. It also required an ALJ to 
determine whether an order imposing debarment is appropriate, if the 
Administrator has sought debarment. The Department received no comments 
related to proposed Sec.  13.55(e) and accordingly retains the section 
as proposed.
    Proposed Sec.  13.55(f) provided that the ALJ's decision would 
become the final order of the Secretary, provided a party does not 
timely appeal the matter to the ARB. The Department received no 
comments regarding this provision and adopts it as proposed.
Section 13.56 Petition for Review
    The Department proposed Sec.  13.56 as the process to apply to 
petitions for review to the ARB from ALJ decisions. Proposed Sec.  
13.56(a) provided that within 30 calendar days after the date of the 
decision of the ALJ, or such additional time as the ARB grants, any 
party aggrieved thereby who desires review must file a petition for 
review with supporting reasons in writing to the ARB with a copy 
thereof to the Chief Administrative Law Judge. It further required the 
petition to refer to the specific findings of fact, conclusions of law, 
and order at issue and that a petition concerning a debarment decision 
state the disregard of obligations to employees and subcontractors, or 
lack thereof, as appropriate. It additionally required a party to serve 
the petition for review, and all supporting briefs, on all parties and 
on the Chief Administrative Law Judge. It also stated that a party must 
timely serve copies of the petition and all supporting briefs on the 
Administrator and the Associate Solicitor, Division of Fair Labor 
Standards, Office of the Solicitor, U.S. Department of Labor. The 
Department received no comments related to proposed Sec.  13.56(a) and 
accordingly retains the section in its proposed form.
    Proposed Sec.  13.56(b) provided that if a party files a timely 
petition for review, the ALJ's decision would be inoperative unless and 
until the ARB issues an order affirming the decision, or the decision 
otherwise becomes a final order of the Secretary. It further provided 
that if a petition for review concerns only the imposition of 
debarment, the remainder of the ALJ's decision would be effective 
immediately. It additionally stated that judicial review would not be 
available unless a timely petition for review to the ARB is first 
filed. Failure of the aggrieved party to file a petition for review 
with the ARB within 30 calendar days of the ALJ decision would render 
the decision final, without further opportunity for appeal. No 
commenter addressed proposed Sec.  13.56(b), and the Department 
implements it without change.
Section 13.57 Administrative Review Board Proceedings
    Proposed Sec.  13.57 outlined the ARB proceedings under the 
Executive Order. Proposed Sec.  13.57(a)(1) stated the ARB has 
jurisdiction to hear and decide in its discretion appeals from the

[[Page 67667]]

Administrator's investigative findings letters issued under Sec.  
13.51(c)(1) or the final sentence of Sec.  13.51(c)(2)(ii), 
Administrator's rulings issued under Sec.  13.58, and from ALJ 
decisions issued under Sec.  13.55. It further provided that in 
considering the matters within its jurisdiction, the ARB would be the 
Secretary's authorized representative and would act fully and finally 
on behalf of the Secretary. Proposed Sec.  13.57(a)(2)(i) identified 
the limitations on the ARB's scope of review, including a restriction 
on passing on the validity of any provision of part 13 and a general 
prohibition on receiving new evidence in the record, because the ARB is 
an appellate body and must decide cases before it based on substantial 
evidence in the existing record. Proposed Sec.  13.57(a)(2)(ii) 
prohibited the ARB from granting attorney's fees or other litigation 
expenses under the EAJA.
    With respect to attorney's fees and costs under the EAJA, the 
Department explained in the discussion of Sec.  13.55(d) above why it 
is declining to adopt NELA's recommendation to add language to permit 
the recovery of attorney's fees and costs by prevailing employees in 
administrative proceedings brought pursuant to these regulations. The 
Department received no other comments related to proposed Sec.  
13.57(a) and is adopting it as proposed.
    Proposed Sec.  13.57(b) required the ARB to issue a final decision 
within a reasonable period of time following receipt of the petition 
for review and to serve the decision by mail on all parties at their 
last known address, and on the Chief ALJ, if the case involved an 
appeal from an ALJ's decision. Proposed Sec.  13.57(c) directed the 
ARB's order to mandate action to remedy a violation, including any 
monetary or equitable relief described in Sec.  13.44, if the ARB 
concludes a violation occurred. Under the proposed rule, if the 
Administrator sought debarment, the ARB would determine whether a 
debarment remedy is appropriate.
    Finally, proposed Sec.  13.57(d) provided that the ARB's decision 
would become the Secretary's final order in the matter. The Department 
received no comments related to proposed Sec.  13.57 (b), (c), and (d) 
and accordingly adopts them as proposed.
Section 13.58 Administrator Ruling
    Proposed Sec.  13.58 set forth a procedure for addressing questions 
regarding the application and interpretation of the rules contained in 
part 13. Proposed Sec.  13.58(a), which the Department derived 
primarily from the DBA's implementing regulations at 29 CFR 5.13, 
provided that such questions could be referred to the Administrator. It 
further provided that the Administrator would issue an appropriate 
ruling or interpretation related to the question. Additionally, under 
proposed Sec.  13.58(a), requests for rulings under this section must 
be addressed to the Administrator, Wage and Hour Division, U.S. 
Department of Labor, Washington, DC 20210.
    Any interested party could, pursuant to proposed Sec.  13.58(b), 
appeal a final ruling of the Administrator issued pursuant to proposed 
Sec.  13.58(a) to the ARB within 30 calendar days of the date of the 
ruling.
    The Department received no comments related to proposed Sec.  13.58 
and accordingly retains the section as proposed.
Appendix A (Contract Clause)
    Because Executive Order 13706 requires inclusion of a contract 
clause in covered contracts, the Department proposed the text of a 
contract clause in appendix A to part 13. The Department is finalizing 
the contract clause as appendix A to part 13 essentially as proposed. 
Certain provisions of the proposed contract clause have been modified, 
however, to reflect changes to relevant portions of part 13 as 
promulgated by the Final Rule; these modifications are explained below. 
As required by the Order, the contract clause specifies employees must 
earn not less than 1 hour of paid sick leave for every 30 hours worked. 
Consistent with the Secretary's authority to obtain compliance with the 
Order, as well as the Secretary's responsibility to issue regulations 
implementing the requirements of the Order that incorporate, to the 
extent practicable, existing procedures, remedies, and enforcement 
processes under the FLSA, SCA, DBA, FMLA, VAWA and Executive Order 
13658, the additional provisions of the contract clause are based on 
the statutory text or implementing regulations of these five statutes 
and Executive Order 13658 and are intended to obtain compliance with 
the Order.
    The introduction to the contract clause provides that the clause 
must be included by the contracting agency in all contracts, contract-
like instruments, and solicitations to which Executive Order 13706 
applies, except for procurement contracts subject to the Federal 
Acquisition Regulation (FAR). For procurement contracts subject to the 
FAR, contracting agencies shall use the clause set forth in the FAR 
developed to implement part 13. Such clause shall accomplish the same 
purposes as the clause set forth in appendix A and shall be consistent 
with the requirements set forth in the Secretary's regulations.
    Paragraph (a) of the contract clause set forth in appendix A 
provides that the contract in which the clause is included is subject 
to Executive Order 13706, the regulations issued in part 13 to 
implement the Order's requirements, and all the provisions of the 
contract clause.
    Paragraph (b) identifies the contractor's general paid sick leave 
obligations. Paragraph (b)(1) stipulates that contractors must permit 
each employee engaged in the performance of the contract by the prime 
contractor or any subcontractor, regardless of any contractual 
relationship that may be alleged to exist between the contractor and 
the employee, to earn not less than 1 hour of paid sick leave for every 
30 hours worked. It further provides that the contractor must allow 
accrual and use of paid sick leave as required by the Executive Order 
and part 13, particularly the accrual, use, and other requirements set 
forth in Sec. Sec.  13.5 and 13.6, which are incorporated by reference 
in the contract.
    The first sentence of paragraph (b)(2), which reflects requirements 
in proposed Sec. Sec.  13.23 and 13.24 and was derived from the 
contract clauses applicable to contracts subject to the SCA, DBA and 
Executive Order 13658, see 29 CFR 4.6(h) (SCA); 29 CFR 5.5(a)(1) (DBA); 
79 CFR 60731 (Executive Order 13658), aims to ensure that employees 
actually receive the full pay and benefits to which they are entitled 
under the Executive Order and part 13 when they use paid sick leave. It 
requires a contractor to provide paid sick leave to all employees when 
due free and clear and without subsequent deduction (except as 
otherwise provided by Sec.  13.24), rebate, or kickback on any account. 
Paragraph (b)(2)'s second sentence clarifies that employees who have 
used paid sick leave must receive the full pay and benefits to which 
they are entitled for the period of leave used no later than one pay 
period following the end of the regular pay period in which the 
employee used the sick leave. This requirement appears in Sec.  13.27.
    Paragraph (b)(3) provides that the prime contractor and any upper-
tier subcontractor shall be responsible for the compliance by any 
subcontractor or lower-tier subcontractor with the requirements of 
Executive Order 13706, part 13, and the contract clause. This 
responsibility on the part of prime and upper-tier contractors for 
subcontractor compliance parallels that of the SCA, DBA and Executive 
Order 13658. See 29 CFR 4.114(b) (SCA); 29 CFR 5.5(a)(6)

[[Page 67668]]

(DBA); 29 CFR 10.21(b) (Executive Order 13658). It also appears in 
Sec.  13.21(b).
    Paragraphs (c) and (d) of the contract clause are derived primarily 
from the contract clauses applicable to contracts subject to the SCA, 
DBA, and Executive Order 13658. See 29 CFR 4.6(i) (SCA); 29 CFR 
5.5(a)(2), (7) (DBA); 79 FR 60731 (Executive Order 13658). Paragraph 
(c) provides that the contracting officer shall, upon its own action or 
upon written request of an authorized representative of the Department 
of Labor, withhold or cause to be withheld from the prime contractor 
under the contract or any other Federal contract with the same prime 
contractor, so much of the accrued payments or advances as may be 
considered necessary to pay employees the full amount owed to 
compensate for any violation of the requirements of Executive Order 
13706, part 13, or the contract clause, including any pay and/or 
benefits denied or lost by reason of its violation; other actual 
monetary losses sustained as a direct result of the violation; and 
liquidated damages. Consistent with withholding procedures under the 
SCA, DBA, and Executive Order 13658, paragraph (c) allows the 
contracting agency and the Department to effect withholding of funds 
from the prime contractor on not only the contract covered by the 
Executive Order but also on any other contract that the prime 
contractor has entered into with the Federal Government.
    Paragraph (d) states the circumstances under which the contracting 
agency and/or the Department may suspend or terminate a contract, or 
debar a contractor, for violations of the Executive Order. It provides 
that in the event of a failure to comply with any term or condition of 
the Executive Order, part 13, or the contract clause in appendix A, the 
contracting agency may on its own action, or after authorization or by 
direction of the Department and written notification to the contractor, 
take action to cause suspension of any further payment, advance, or 
guarantee of funds until such violations have ceased. Paragraph (d) 
additionally provides that any failure to comply with the contract 
clause may constitute grounds for termination of the right to proceed 
with the contract work and, in such event, for the Federal Government 
to enter into other contracts or arrangements for completion of the 
work, charging the contractor in default with any additional cost; this 
requirement operates as provided in Sec.  13.11(c). Paragraph (d) also 
provides that a breach of the contract clauses may be grounds to debar 
the contractor as provided in Sec.  13.52.
    Paragraph (e), which implements section 2(f) of the Executive 
Order, provides that the paid sick leave required by the Executive 
Order, part 13, and the contract clause is in addition to a 
contractor's obligations under the SCA and DBA, and that a contractor 
may not receive credit toward its prevailing wage or fringe benefit 
obligations under those Acts for any paid sick leave provided in 
satisfaction of the requirements of the Executive Order and part 13.
    Paragraph (f), which implements section 2(l) of the Executive 
Order, provides that nothing in Executive Order 13706 or part 13 shall 
excuse noncompliance with or supersede any applicable Federal or State 
law, any applicable law or municipal ordinance, or a CBA requiring 
greater paid sick leave or leave rights than those established under 
Executive Order 13706 and part 13. Sections 13.5(f)(2)(i) and Sec.  
13.5(f)(1) also implement sections 2(f) and 2(l) of the Executive 
Order, respectively, and the preamble discussions related to Sec. Sec.  
13.5(f)(2)(i) and 13.5(f)(1) accordingly describe the operation of 
paragraphs (e) and (f) in greater detail.
    Paragraph (g) sets forth recordkeeping and related obligations that 
are consistent with the Secretary's authority under section 4 of the 
Order to obtain compliance with the Order, and that the Department 
views as essential to determining whether the contractor has satisfied 
its obligations under the Executive Order. The Department derived the 
obligations set forth in paragraph (g) from the FLSA, SCA, DBA, FMLA 
and Executive Order 13658. The recordkeeping obligations in paragraph 
(g) duplicate those in Sec.  13.25, and paragraph (g) has accordingly 
been modified to reflect any changes to Sec.  13.25. Specifically, 
paragraphs (xvi) and (xvii) have been added to section (1) to reflect 
the addition of Sec.  13.25(16) and (17); paragraph (ii) has been added 
to section (2) to reflect the addition of Sec.  13.25(b)(2); and 
paragraphs (iii), (vi), (vii), and (x) have been edited to reflect 
minor revisions made to the corresponding paragraphs of Sec.  13.25. A 
full description of those obligations and changes appears in the 
preamble related to Sec.  13.25.
    Paragraph (h) requires the contractor to both insert the contract 
clause in all its covered subcontracts and to require its 
subcontractors to include the clause in any covered lower-tier 
subcontracts.
    Paragraph (i), which is derived from the SCA contract clause, 29 
CFR 4.6(n), and the Executive Order 13658 contract clause, 79 FR 60731, 
sets forth the certifications of eligibility the contractor makes by 
entering into the contract. Paragraph (i)(1) stipulates that by 
entering into the contract, the contractor and its officials certify 
that neither the contractor nor any person or firm with an interest in 
the contractor's firm is a person or firm ineligible to be awarded 
Government contracts by virtue of the sanctions imposed pursuant to 
section 5 of the SCA, section 3(a) of the DBA, or 29 CFR 5.12(a)(1). 
Paragraph (i)(2) constitutes a certification that no part of the 
contract shall be subcontracted to any person or firm on the list of 
persons or firms ineligible to receive Federal contracts currently 
maintained on the System for Award Management Web site, http://www.SAM.gov. Paragraph (i)(3) contains an acknowledgement by the 
contractor that the penalty for making false statements is prescribed 
in the U.S. Criminal Code at 18 U.S.C. 1001.
    Paragraph (j) implements section 2(k) of the Executive Order. The 
text of paragraph (j) mirrors the regulatory text at Sec. Sec.  13.6(a) 
and 13.6(b); accordingly, paragraph (j) has been modified to reflect an 
additional example of interference included in the regulatory text. A 
full description of the operation of the proposed contractor 
obligations not to interfere with or discriminate against employees 
with respect to the accrual or use of paid sick leave accordingly 
appears in the preamble related to Sec. Sec.  13.6(a) and 13.6(b).
    Paragraph (k) provides that employees cannot waive, nor may 
contractors induce employees to waive, their rights under Executive 
Order 13706, part 13, or the contract clause. As discussed in greater 
detail in the preamble related to Sec.  13.7, the Department included a 
provision prohibiting the waiver of rights in the regulations 
implementing the Minimum Wage Executive Order and believes it is 
appropriate to adopt the same policy here.
    Paragraph (l) requires that contractors notify all employees 
performing work on or in connection with a covered contract of the paid 
sick leave requirements of Executive Order 13706, part 13, and the 
contract clause by posting a notice provided by the Department of Labor 
in a prominent and accessible place at the worksite so it may be 
readily seen by employees. It additionally permits contractors that 
customarily post notices to employees electronically to post the notice 
electronically, provided such electronic posting is displayed 
prominently on any Web site that is maintained by the contractor, 
whether external or internal, and is customarily used for notices to

[[Page 67669]]

employees about terms and conditions of employment. The notice 
obligations contained in paragraph (l) mirror those contained in Sec.  
13.26(a)-(b), which the Department derived from the Minimum Wage 
Executive Order Final Rule at 29 CFR 10.29(b)-(c). The preamble related 
to those sections contains a discussion of the Department's rationale 
for including the particular notice obligation it has adopted.
    Paragraph (m) is based on section 5(b) of the Executive Order and 
provides that disputes related to the application of the Executive 
Order to the contract shall not be subject to the contract's general 
disputes clause. Instead, such disputes shall be resolved in accordance 
with the dispute resolution process set forth in part 13. Paragraph (m) 
also provides that disputes within the meaning of the contract clause 
include disputes between the contractor (or any of its subcontractors) 
and the contracting agency, the U.S. Department of Labor, or the 
employees or their representatives.

III. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq., 
and its attendant regulations, 5 CFR part 1320, requires that the 
Department consider the impact of paperwork and other information 
collections burdens imposed on the public. Under the PRA, an agency may 
not collect or sponsor the collection of information, nor may it impose 
an information collection requirement unless it displays a currently 
valid Office of Management and Budget (OMB) control number. See 5 CFR 
1320.8(b)(3)(vi). The OMB has assigned control number 1235-0018 to the 
general recordkeeping provisions of various labor standards that the 
WHD administers and enforces and control number 1235-0021 to the 
information collection which gathers information from complainants 
alleging violations of such labor standards. The OMB has assigned 
control number 1235-0029 to the new information collection request 
(ICR) that the Department has created to address any recordkeeping 
requirements related to paid sick leave that may be new.
    In accordance with the PRA, the Department solicited public 
comments on the proposed changes to the existing information 
collections and the new information collection in the NPRM, as 
discussed below. See 81 FR 9592. The Department also submitted a 
contemporaneous request for OMB review of the proposed revisions to the 
information collections in accordance with 44 U.S.C. 3507(d). The 
Department extended the period for filing comments on the PRA and 
information collections only, to provide interested parties additional 
time to submit comments. See 81 FR 19997. On April 28, 2016, the OMB 
issued a notice that continued the previous approval of the information 
collections under the existing terms of clearance and asked the 
Department to resubmit the information collection requests upon 
promulgation of the Final Rule and after consideration of public 
comments received.
    Circumstances Necessitating Collection: The Final Rule contains 
provisions that are considered collections of information under the 
PRA. Pursuant to Sec.  13.21, the contractor and any subcontractors 
shall include in any covered subcontracts the applicable Executive 
Order paid sick leave contract clause referred to in Sec.  13.11(a) and 
shall require, as a condition of payment, that the subcontractor 
include the contract clause in any lower-tier subcontracts. Pursuant to 
Sec.  13.25, contractors and each subcontractor performing work subject 
to Executive Order 13706 and these regulations shall make and maintain 
during the course of the covered contract, and preserve for no less 
than three years thereafter, records containing the information 
specified in paragraphs (a)(1) through (17) of Sec.  13.25 for each 
employee and shall make them available for inspection, copying, and 
transcription by authorized representatives of the Wage and Hour 
Division. These include: (1) Name, address, and Social Security number 
of each employee; (2) The employee's occupation(s) or 
classification(s); (3) The rate or rates of wages paid (including all 
pay and benefits provided); (4) The number of daily and weekly hours 
worked; (5) Any deductions made; (6) The total wages paid (including 
all pay and benefits provided) each pay period; (7) A copy of 
notifications to employees of the amount of paid sick leave the 
employees have accrued as required under Sec.  13.5(a)(2); (8) A copy 
of employees' requests to use paid sick leave, if in writing, or, if 
not in writing, any other records reflecting such employee requests; 
(9) Dates and amounts of paid sick leave used by employees; (10) A copy 
of any written denials of employees' requests to use paid sick leave, 
including explanations for such denials, as required under Sec.  
13.5(d)(3); (11) Any records reflecting the certification and 
documentation a contractor may require an employee to provide under 
Sec.  13.5(e), including copies of any certification or documentation 
provided by an employee; (12) Any other records showing any tracking of 
or calculations related to an employee's accrual and/or use of paid 
sick leave; (13) The relevant covered contract; (14) The regular pay 
and benefits provided to an employee for each use of paid sick leave; 
and (15) Any financial payment made for unused paid sick leave upon a 
separation from employment intended, pursuant to Sec.  13.5(b)(5), to 
relieve a contractor from the obligation to reinstate such paid sick 
leave as otherwise required by Sec.  13.5(b)(4).
    Additionally, under Sec.  13.25, if a contractor wishes to 
distinguish between an employee's covered and non-covered work, the 
contractor must keep records reflecting such distinctions.
    The Department notes that some of the recordkeeping requirements 
related to paid sick leave may be new requirements for some 
contractors. As a result, the Department created a new information 
collection, 1235-0NEW, titled ``Government Contractor Paid Sick Leave'' 
and submitted it to OMB for approval. On April 28, 2016, the OMB filed 
a notice of action, assigning OMB control number 1235-0029 to the new 
package, and asked that prior to publication of the Final Rule, the 
Department provide OMB a summary of all comments received and identify 
any changes made in the Final Rule in response to those comments. A new 
information collection request (ICR) was submitted to the OMB that 
would provide PRA authorization for control number 1235-0029 to 
incorporate the recordkeeping provisions in this Final Rule and to 
incorporate burdens associated with the new recordkeeping requirements.
    Additionally, on, April 28, 2016, the OMB filed a notice of action 
instructing the Department to continue the information collections 
under the existing terms of clearance for ICR 1235-0018 and ICR 1235-
0021, and asked the Department to resubmit the information collection 
requests upon promulgation of the Final Rule and after consideration of 
public comments received. The Department will submit to OMB for 
approval a revision to ICR 1235-0018 incorporating certain 
recordkeeping provisions in this rule even though the Final Rule does 
not increase a paperwork burden on the regulated community of the 
information collection provisions contained in ICR 1235-0018. The ICR 
under OMB control number 1235-0018 contains the general FLSA 
recordkeeping requirements and burdens. The Final Rule does restate 
recordkeeping requirements that are already required for other 
purposes. The restated recordkeeping requirements are located in Sec.  
13.25(a)(1)-(6) (including an

[[Page 67670]]

exemption located in Sec.  13.25(c)). Such burden is already captured 
in the ICR for all employers; however, the Department believes 
restating the requirements in one place will help employers, 
particularly small entities, comply with this Final Rule by removing 
the need to cross check other regulations.
    The WHD obtains PRA clearance under control number 1235-0021 for an 
information collection covering complaints alleging violations of 
various labor standards that the agency administers and enforces. An 
ICR has been submitted to revise the approval to incorporate the 
provisions in the Final Rule applicable to complaints and adjust burden 
estimates to reflect any increase in the number of complaints filed 
against contractors who fail to comply with the paid sick leave 
requirements of Executive Order 13706 and 29 CFR part 13.
    Subpart E establishes administrative proceedings to resolve 
investigation findings and imposes information collection requirements, 
particularly with respect to hearings. However, the PRA's requirements 
do not apply to a civil action in which a U.S. agency is a party, or to 
an administrative action or investigation involving a U.S. agency. See 
44 U.S.C. 3518(c)(1)(B); 5 CFR 1320.4(a)(2). Therefore, the Department 
determined the collections of information required by subpart E of this 
Final Rule are exempt from the PRA's requirements.
    Information and technology: There is no particular order or form of 
records prescribed by the Final Rule. A contractor may meet the 
requirements of this Final Rule using paper or electronic means. The 
WHD, in order to reduce burden caused by the filing of complaints that 
are not actionable by the agency, uses a complaint filing process that 
has complainants discuss their concerns with WHD professional staff. 
This process allows agency staff to refer complainants raising concerns 
that are not actionable under wage and hour laws and regulations to an 
agency that may be able to offer assistance.
    Public comments: The Department sought public comments on its 
analysis that the NPRM created a slight paperwork burden associated 
with ICR 1235-0021 but did not add to the paperwork burden on the 
regulated community for the information collection provisions otherwise 
previously approved in ICR 1235-0018. Additionally, the Department 
sought comments on its analysis that the proposed rule created a new 
paperwork burden on the regulated community as described in the new 
information collection provisions contained in ICR 1235-0029. The 
Department received some comments with respect to the paperwork. The 
SEIU submitted a comment, with approximately 4,000 employee signatures, 
voicing general support for the new reporting requirements established 
by the NPRM and stating that Section 13.21 (which requires federal 
contractors to include the Executive Order contract clause in all of 
their federal contracts) ``guarantees that federal contractors and 
subcontractors are familiar with the paid sick leave requirements and 
that they will comply with these requirements `as a condition of 
payment','' and that Section 13.25's recordkeeping requirements 
``assist the agency with both preventing and detecting possible 
instances of contractor fraud and inaccuracies.''
    The Chamber commented that the Department's Paperwork Reduction Act 
burden estimates provided in the NPRM were too low. They contended that 
the Department's assertion that 322,067 workers will gain paid sick 
leave rights during the first three years of implementation of the 
proposed rule was an underestimate for the number of affected 
employees. They suggested that a more reasonable estimate of the number 
of affected workers would include the number of workers working for 
concessionaires and lessees of space on Federal property, independent 
contractors who are covered under the EO, subcontractor employees, and 
employees who spend time working on non-Federal projects. As described 
in more detail in the relevant sections, to address commenters' 
concerns with respect to the number of affected employees, the 
Department reviewed its methodology and revised its estimates by adding 
concessioners and other contractors on Federal lands, lessees of space 
on Federal property, and firms with operations on Federal bases to the 
analysis of this Final Rule, which contributed to an increase in the 
estimated number of affected employees. Also, using more recent data to 
estimate the number of subcontractors led to the inclusion of 3,763 
more subcontractors than in the NPRM. The Department notes that the OES 
includes incorporated independent contractors, and thus those workers 
are included in the analysis. Unincorporated independent contractors 
continue to be excluded in this Final Rule as they are unlikely to be 
covered by this Rule because, assuming they are bona fide independent 
contractors, they are not covered by the FLSA and are unlikely to be 
performing work on or in connection with SCA-covered, or DBA-covered 
contracts. As further described below, the methodology represents 
workers who are working exclusively and year-round on covered Federal 
contracts, thus the number of workers who will gain benefits will 
likely exceed this number. However, data are not available to estimate 
the number of workers gaining benefits. Implications of this for costs 
and transfers are discussed in the relevant sections.
    The Chamber also expressed the view that the new recordkeeping 
burden should be higher because the Department underestimated its 
estimates of patterns of leave use; time values associated with 
recordkeeping, creating a certified list, and providing leave balances; 
and failed to account for the burden created for employers as a part of 
regulatory familiarization. The Department agrees that the Executive 
Order and the regulations will usually require employers subject to the 
Order to track accrued leave and leave usage and to provide notice to 
employees of the amount of accrued paid leave, and will allow employers 
subject to the Order to obtain a certification under certain 
circumstances. The Department has accordingly created a new information 
collection requirement for employers subject to these new requirements. 
The Department's estimates of time values related to these requirements 
are based on its enforcement experience. The Department has added a new 
section on regulatory familiarization to this ICR to address the 
Chamber's concern.
    An agency may not conduct an information collection unless it has a 
currently valid OMB approval, and the Department submitted the 
identified information collections contained in the proposed rule to 
OMB for review in accordance with the PRA under Control numbers 1235-
0018, and 1235-0021. The Department submitted a new information 
collection request in the proposed rule as 1235-0NEW, to which OMB 
subsequently assigned control number 1235-0029. See 44 U.S.C. 3507(d); 
5 CFR 1320.11. The Department has resubmitted the revised information 
collections to OMB for approval, and the Department intends to publish 
a notice announcing OMB's decision regarding this information 
collection request. A copy of the information collection request can be 
obtained at http://www.Reginfo.gov or by contacting the Wage and Hour 
Division as shown in the FOR FURTHER INFORMATION CONTACT section of 
this preamble.

[[Page 67671]]

    Total burden for the recordkeeping and complaint process 
information collections, including the burdens that will be unaffected 
by this Final Rule and any changes are summarized as follows:
    Type of Review: Revision to currently approved information 
collections.
    Agency: Wage and Hour Division, Department of Labor.
    Title: Records to be Kept by Employers--Fair Labor Standards Act.
    OMB Control Number: 1235-0018.
    Affected Public: Private sector businesses or other for-profits, 
farms, not-for-profit institutions, state, local and tribal 
governments, and individuals or households.
    Estimated Number of Respondents: 5,511,960 (unaffected by this 
rulemaking).
    Estimated Number of Responses: 46,057,855 (unaffected by this 
rulemaking).
    Estimated Burden Hours: 3,489,585 (unaffected by this rulemaking).
    Estimated Time per Response: Various (unaffected by this 
rulemaking).
    Frequency: Various (unaffected by this rulemaking).
    Other Burden Cost: 0.

    Title: Employment Information Form.
    OMB Control Number: 1235-0021.
    Affected Public: Businesses or other for-profit, not-for-profit 
institutions, state and local governments, and individuals or 
households.
    Total Respondents: 37,594 (227 from this rulemaking).
    Estimated Number of Responses: 37,594 (227 from this rulemaking).
    Estimated Burden Hours: 12,532 (76 from this rulemaking).
    Estimated Time per Response: 20 minutes (unaffected by this 
rulemaking).
    Frequency: once.
    Other Burden Cost: 0.

    Type of Review: Approval of New Information Collection.
    Agency: Wage and Hour Division, Department of Labor.
    Title: Government Contractor Paid Sick Leave.
    OMB Control Number: 1235-0029.
    Affected Public: Businesses or other for-profit, farms, not-for-
profit institutions, state, local and tribal governments, and 
individuals or households.
    Total Respondents: 617,200.
    Estimated Number of Responses: 13,577,407.
    Estimated Burden Hours: 590,478.
    Estimated Time per Response: various.
    Frequency: on occasion.
    Other Burden Cost: $347,784 (maintenance and operations).

IV. Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess the 
costs and benefits of an intended regulation and to propose or adopt a 
regulation only upon a reasoned determination that the intended 
regulation's net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity) 
justify its costs. Executive Order 13563 emphasizes the importance of 
quantifying both costs and benefits where possible, reducing costs, 
harmonizing rules, and promoting flexibility.
    Under Executive Order 12866, it must be identified whether a 
regulatory action is significant and therefore subject to the 
requirements of the Executive Order and to review by OMB. 58 FR 51735. 
Section 3(f) of Executive Order 12866 defines a ``significant 
regulatory action'' as an action that is likely to result in a rule 
that: (1) Has an annual effect on the economy of $100 million or more, 
or adversely affects in a material way a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local or tribal governments or communities (also 
referred to as economically significant); (2) creates serious 
inconsistency or otherwise interferes with an action taken or planned 
by another agency; (3) materially alters the budgetary impacts of 
entitlement grants, user fees, or loan programs, or the rights and 
obligations of recipients thereof; or (4) raises novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in Executive Order 12866. Id.
    The Office of Management and Budget has determined that this Final 
Rule is a ``significant regulatory action'' under section 3(f) of 
Executive Order 12866 because it is economically significant based on 
the analysis set forth below. As a result, the Department has prepared 
a Final Regulatory Impact Analysis (FRIA) as required under section 
6(a)(3) of Executive Order 12866, and OMB has reviewed the Final Rule.

A. Introduction

i. Background and Need for Rulemaking
    Executive Order 13706 (EO) provides that employees can earn up to 
seven days of paid sick leave annually on specified categories of 
contracts with the Federal Government where either the solicitation has 
been issued, or the contract has been awarded outside the solicitation 
process, on or after January 1, 2017. The Executive Order states that 
the Federal Government's procurement interests in economy and 
efficiency are promoted when the Federal Government contracts with 
sources that allow their employees to earn paid sick leave.\2\ This 
rulemaking implements the Executive Order, consistent with the 
authorization in section 3 of the Order.
---------------------------------------------------------------------------

    \2\ The phrase ``economy and efficiency'' is used here only in 
the sense implied by the Federal Property and Administrative 
Services Act.
---------------------------------------------------------------------------

ii. Summary of Affected Employees, Costs, Benefits, and Transfers
    The Department estimated the number of employees who would, as a 
result of the Executive Order and this Final Rule, receive some 
additional amount of paid sick leave, i.e., ``affected employees.'' 
There are two categories of affected employees: Those covered employees 
who currently receive no paid sick leave, and those covered employees 
who currently receive paid sick leave in an amount less than they would 
be entitled to receive under the Executive Order (up to 7 days 
annually). As discussed in detail below, because the Final Rule only 
applies to ``new contracts,'' and the Department has assumed it will 
take five years for the universe of possibly covered contracts to 
become ``new,'' the full impact of the rulemaking will not likely occur 
before Year 5. In Year 5, the Department estimates there will be 1.2 
million affected employees (Table 1).3 4 This includes 
approximately 593,800 employees who currently receive no paid sick 
leave and 556,800 employees who receive some paid sick leave but would 
be entitled to receive additional paid sick leave under the Final Rule 
(Table 8).
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    \3\ This includes projected net job growth and so is somewhat 
larger than five times the number of affected employees in Year 1. 
Net job growth takes into account both workers entering and leaving 
Federal government contracting.
    \4\ The estimates of affected employees represent the number of 
full-year employees working exclusively on covered contracts.
---------------------------------------------------------------------------

    The Department also estimated costs and transfer payments 
associated with this rulemaking. During the first 10 years the rule is 
in effect, average annualized direct employer costs are estimated to be 
$27.3 million (Table 1). (This estimation assumes a 7 percent real 
discount rate; hereafter, unless otherwise specified, average 
annualized values will be presented using a 7 percent real discount 
rate.) This estimated annualized cost includes $10.7 million for 
regulatory familiarization, $4.9 million for initial implementation 
costs, $3.7 million for recurring implementation costs, and $8.0 
million for administrative costs. For a discussion of how the 
Department

[[Page 67672]]

estimated these numbers, please see section V.C.ii.
    Transfer payments are transfers of income from employers to 
employees. Estimated average annualized transfer payments are $349.6 
million per year over 10 years. Some of these payments may be in terms 
of increased time away from work rather than increased income if 
workers take more days of sick leave after the Rulemaking. We refer to 
all such gains as transfers.
    Lastly, the Department estimated deadweight loss (DWL). DWL occurs 
when a market operates at less than optimal equilibrium output, which 
happens anytime the conditions for a perfectly competitive market are 
not met, including but not limited to a labor market intervention. The 
Department estimated that average annualized DWL will be $734,000 per 
year during the first ten years of the rule. This will be primarily due 
to a possible small decrease in employment that may be a consequence of 
the Final Rule. This DWL analysis assumes the market is currently in 
equilibrium.
    There will be many benefits associated with this rule. However, due 
to data limitations, these benefits are not monetized. The following 
benefits are a subset of those discussed qualitatively: Improved 
employee health, improved health of dependents, increased productivity, 
reduced hiring costs, decreased healthcare expenditures, and job 
growth.

                                         Table 1--Summary of Affected Employees, Regulatory Costs, and Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Future years (1,000s)                 Average annualized value
                                                              Year 1     ------------------------------------------------            (1,000s)
                                                             (1,000s)                                                    -------------------------------
                                                                              Year 2          Year 5          Year 10      3% Real rate    7% Real rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Affected employees......................................           222.1           454.0         1,150.6         1,203.7  ..............  ..............
Direct employer costs (2015$)...........................        $125,044         $10,541         $16,936         $11,034         $25,027         $27,255
    Regulatory familiarization..........................          80,427               0               0               0           9,154          10,702
    Initial implementation..............................          36,475               0               0               0           4,151           4,853
    Recurring implementation............................           6,107           6,379           6,389               0           3,396           3,690
    Administrative......................................           2,036           4,162          10,548          11,034           8,326           8,010
Transfers (2015$).......................................          85,508         176,226         456,686         496,765         364,112         349,629
DWL (2015$).............................................             183             376             963           1,028             764             734
--------------------------------------------------------------------------------------------------------------------------------------------------------

iii. Terminology and Abbreviations
    The following terminology and abbreviations will be used throughout 
this Regulatory Impact Analysis (RIA).

    ATUS: American Time Use Survey.
    BLM: Bureau of Land Management.
    BLS: Bureau of Labor Statistics.
    CPI-U: Consumer Price Index for all urban consumers.
    CPS: Current Population Survey.
    CUA: Commercial Use Authorization.
    DBA: Davis-Bacon Act.
    DWL: Deadweight loss. This is the loss of economic efficiency 
that can occur when the market equilibrium for a good or service is 
not achieved.
    ECEC: Employer Costs for Employee Compensation.
    FPDS-NG: Federal Procurement Data System-Next Generation.
    FS: U.S. Forest Service.
    FY: Fiscal year. The Federal fiscal year, used in this analysis, 
is from October 1 through September 30.
    GSA: General Services Administration.
    NCS: National Compensation Survey.
    NHIS: National Health Interview Survey.
    NPS: National Park Service.
    OES: Occupational Employment Statistics.
    PTO: Paid time-off.
    Price elasticity of labor demand (with respect to wage): The 
percentage change in labor hours demanded in response to a one 
percent increase in wages.
    Price elasticity of labor supply (with respect to wage): The 
percentage change in labor hours supplied in response to a one 
percent increase in wages.
    Real dollars (2015$): Dollars adjusted using the CPI-U to 
reflect their purchasing power in 2015.
    RIA: Regulatory Impact Analysis. This will be used to reference 
the analysis conducted to assess the impact of this regulation.
    SAM: System for Award Management.
    SBA Advocacy: Office of Advocacy of the U.S. Small Business 
Administration.
    SUSB: Survey of United States Businesses.
    Walsh-Healey PCA: The Walsh-Healey Public Contracts Act.

B. Methodology to Determine the Number of Affected Employees and Firms

i. Overview and Data
    This section explains the Department's methodology to estimate the 
number of affected employees and firms. The number of firms is 
estimated primarily from the General Services Administration's (GSA) 
System for Award Management (SAM). This is supplemented with a variety 
of other sources including data from the NPS, the BLM, the FS and SBA 
Advocacy. There are no data on the number of employees working on 
Federal contracts (``Federal contract employees''); therefore, to 
estimate the number of Federal contract employees, the Department 
employed the approach used in the Minimum Wage Executive Order Final 
Rule.\5\ This approach uses data from USASpending.gov, a database of 
government contracts from the Federal Procurement Data System-Next 
Generation (FPDS-NG).
---------------------------------------------------------------------------

    \5\ See 79 FR 60634, 60692-60720.
---------------------------------------------------------------------------

    After determining the total number of Federal contract employees, 
the Department estimated the share who will receive additional days of 
paid sick leave due to the rulemaking. The 2015 National Compensation 
Survey (NCS) provides data on the percentage of employees with paid 
sick leave and categorical ranges of the annual number of days of leave 
that employees receive. This distribution allowed the Department to 
estimate the number of employees who receive less than the amount of 
paid sick leave required under the Final Rule. The 2015 NCS does not 
provide data for the agriculture industry. Therefore, the Department 
supplemented the 2015 NCS data on paid sick leave with data from the 
2011 ATUS Leave Module.
ii. Number of Affected Firms
    Commenters asserted that the Department underestimated the number 
of firms affected by the rulemaking for several reasons. In response to 
these comments, the Department reviewed its methodology for estimating 
the number of affected firms and revised its estimates by excluding 
firms that are only applying for grants, and adding entities likely 
operating under covered nonprocurement contracts, specifically 
nonprocurement contracts on Federal lands, firms with leases in 
Federally owned properties, and firms with operations on Federal bases 
to the analysis. These revisions are described below with a discussion 
of commenters' concerns.

[[Page 67673]]

    The main data source used to estimate the number of affected firms 
is SAM. SAM reports all entities registered in the database, which is a 
requirement to bid for Federal procurement contracts or grants. Firms 
report a 6-digit primary NAICS code as part of their SAM registration. 
NAICS codes were not reported by 20 companies; for these firms NAICS 
codes are assigned based on the proportion of firms in each industry.
    In the NPRM we used SAM data to estimate that 543,851 firms might 
be affected by the rulemaking. See 81 FR 9641. However, this estimate 
included firms whose sole contractual arrangement with the Federal 
Government was that they were applying for grants. These firms will not 
be affected by the rulemaking, and therefore, we have eliminated them 
from the analysis. The Department updated its estimate by downloading 
August 2015 SAM data and removing from the analysis firms only 
receiving grants. After this adjustment we found 415,310 registered 
firms.6 7 This is a reduction of 128,541 firms relative to 
the NPRM.
---------------------------------------------------------------------------

    \6\ Data released in monthly files. Available at: https://www.sam.gov/portal/SAM/#1.
    \7\ Entities registering in SAM are asked if they wish to bid on 
contracts. If a non-Federal entity answers ``Yes'' to this question, 
SAM marks the registration as being ``All Awards.'' This is the 
``Purpose of Registration'' column in the SAM data. The Department 
included only firms with a value of ``Z2,'' which denotes ``All 
Awards.'' See Section 3.2: Determining your Purpose of Registration 
in the System for Award Management User Guide available at: https://test.sam.gov/sam/SAM_Guide/SAM_User_Gude.htm#_Toc330768975.
---------------------------------------------------------------------------

    SAM includes all prime contractors and some subcontractors (those 
who are also prime contractors or who have otherwise registered in 
SAM). However, we are unable to determine the number of subcontractors 
who are not in the SAM database. Therefore, for the NPRM the Department 
examined five years of USASpending data \8\ and found 20,589 
subcontractors who did not hold contracts as primes (and thus may not 
be included in SAM), and added these firms to the total from SAM. The 
Department used the number of unique subcontractors over five years to 
adjust for USASpending not including lower tiers of subcontractors. No 
commenters provided data or suggestions for methodological 
improvements, so we continue to use this methodology in this Final 
Rule. Applying this method to the most recent five years of data, 
FY2011 through FY2015, the Department found 24,352 subcontractors who 
do not hold contracts as primes and added these firms to the 415,310 
firms not registered in SAM solely for the purpose of receiving grants 
in this Final Rule (Table 2).
---------------------------------------------------------------------------

    \8\ The Department identified subawardees from the 
USASpending.gov data who did not perform work as a prime during 
those years. The Department included subcontractors from five years 
of data to compensate for lower-tier subcontractors that may not be 
included in USASpending.gov. The Department believes this is a 
reasonable approximation of the number of subcontractors, and 
received no comments providing a better method. The USASpending data 
are discussed in more detail in the section on ``Number of 
Potentially Affected Employees.''
---------------------------------------------------------------------------

    Commenters such as the Chamber/IFA and the SBA Advocacy noted the 
Department did not account for nonprocurement concessions contracts and 
nonprocurement contracts entered into with the Federal Government in 
connection with Federal property or lands and related to offering 
services for Federal employees, their dependents, or the general 
public. In response to these comments, the Department has included 
49,757 additional firms in the Final Rule. Estimating the number of 
entities operating under covered nonprocurement contracts on Federal 
property or lands involved many data sources and assumptions as 
described below.\9\
---------------------------------------------------------------------------

    \9\ Those estimates primarily capture those covered contracts 
for concessions and contracts in connection with Federal property or 
lands and relating to services for Federal employees, their 
dependents, or the general public that are nonprocurement in nature, 
such that the contracting entities are not necessarily listed in 
SAM. However, the estimates will additionally capture some SCA-
covered contracts because SCA-covered contracts, contracts for 
concessions and contracts in connection with Federal property or 
lands are to some degree overlapping categories of contracts (e.g., 
at least some concessions contracts and contracts in connection with 
Federal property or lands are covered by the SCA, see, e.g., Cradle 
of Forestry in America Interpretive Association, ARB Case No. 99-
035, 2001 WL 328132 (ARB March 30, 2001)).
---------------------------------------------------------------------------

    First, the Department estimated the number of contractors with 
National Park Service (NPS) concessions contracts. The NPS Web site 
contains a list of entities operating under concessions contracts on 
NPS lands.\10\ The Department downloaded all 473 records contained on 
the Web site, identified unique firms by name, and assigned them to 
industries based on the first service provided listed. This results in 
418 entities operating under concessions contracts on NPS lands. 
Second, the Department estimated the number of NPS Commercial Use 
Authorizations (CUAs). The Department informally consulted with the NPS 
and learned that the NPS has approximately 5,900 FY2015 CUAs. The 
Department understands that a NPS CUA is a written authorization to 
provide services to park area visitors. See 36 CFR 18.2(c). Because 
this definition may render NPS CUAs contracts with the Federal 
Government in connection with Federal property or lands and related to 
offering services to the general public and/or SCA-covered contracts, 
the Department has assumed, solely for purposes of the economic 
analysis, that all NPS CUAs are contracts covered by the Executive 
Order. Because the number of CUAs does not take into account that one 
firm may hold multiple authorizations, we multiplied the total number 
of CUAs by the ratio of unique firms holding NPS concessions contracts 
to total NPS concessions contracts to estimate the number of 
contractors with CUAs (418 divided by 473 = 88 percent) for an 
estimated 5,190 unique firms with CUAs from NPS. We also used the 
industry distribution from NPS concessions contracts to assign CUA 
permit holders to industries because industry information was not 
directly available.
---------------------------------------------------------------------------

    \10\ Available at: http://www.concessions.nps.gov/authorized_concessions.htm. The Department has assumed all NPS 
concessions contracts are covered by the EO, solely for purposes of 
this economic analysis, primarily because the EO itself specifically 
covers concessions contracts.
---------------------------------------------------------------------------

    Next, we estimated the number of U.S. Forest Service special use 
authorizations. The Department informally consulted the FS, which 
informed the Department that 77,353 special use authorizations (SUAs) 
were in effect in fiscal year 2015. Based on further informal 
consultations with the FS, the Department estimates that approximately 
36 percent of these SUAs may be covered contracts. No data are 
available to determine whether a contractor holds more than one permit; 
therefore, we used the NPS ratio of unique concessions contract holders 
to total concessions contract holders to estimate the number of unique 
contractors with FS permits (88 percent). This leaves 24,370 unique 
firms that may be affected. The Department combined its own assumptions 
with information from the U.S. Census Bureau on the NAICS 
classification when determining the relevant industry for each type of 
permit because data were not available.
    We also estimated the number of affected NPS special use permits. 
During informal discussions with DOL, NPS officials estimated it issued 
33,700 special use permits in FY 2015.\11\ It is likely that many, if 
not most, of these permits will not be covered by the

[[Page 67674]]

rulemaking, but the Department has no method for directly determining 
the number of such permits that might be covered. Therefore the 
Department assumed, solely for purposes of the economic analysis, that 
the EO would cover 36 percent of NPS special use permits using the FS 
data for SUAs, and that 88 percent of the permits are held by unique 
contract holders based on NPS data for CUAs. Therefore, the Department 
estimates that 10,600 entities holding special use permits will be 
covered by the rule. We assigned these permit holders to the ``arts, 
entertainment, and recreation'' industry.
---------------------------------------------------------------------------

    \11\ According to the NPS, activities that may require a special 
use permit ``include (but are not limited to) weddings, [F]irst 
[A]mendment demonstration activities, a bike race, fishing 
tournament, group activities (groups of 20 or more participants). 
See https://www.nps.gov/ever/learn/management/specialuse.htm.
---------------------------------------------------------------------------

    Next, we estimated the number of U.S. Bureau of Land Management 
(BLM) special recreation permits. BLM reports 4,004 of these permits in 
FY2014.\12\ The Department again relied on the FS data to assume that 
36 percent of these permits will be covered, and that 88 percent will 
be held by unique contractors.\13\ This results in 1,261 entities 
holding BLM special recreation permits. We assumed that these are in 
the ``arts, entertainment, and recreation'' industry. These estimates 
for the NPS, FS, and BLM do not account for the possibility that the 
same firms may hold concessions contracts with more than one group.
---------------------------------------------------------------------------

    \12\ U.S. Department of the Interior, Bureau of Land Management. 
(2015). Public Land Statistics 2014. Available at: http://www.blm.gov/public_land_statistics/pls14/pls2014.pdf.
    \13\ The Department believes it is reasonable to apply the 36% 
coverage estimates to NPS special use permits and BLM special 
recreation permits because it understands that these permits are 
likely for sufficiently similar purposes and entered into with 
sufficiently similar individuals and entities as the FS SUAs.
---------------------------------------------------------------------------

    SBA Advocacy provided estimates of retail and concession leases in 
federally-owned buildings. SBA Advocacy cites the GSA as the source for 
732 retail leases and ``hundreds of other businesses that have 
concessions contracts'' in Federally-owned buildings. We were unable to 
confirm these numbers. We interpreted ``hundreds'' to be 500 and thus 
included a total of 1,232 entities. SBA also suggested that the NPRM's 
estimate of affected firms did not include visually-impaired 
contractors that lease space at federal building to operate vending 
facilities under the Randolph-Sheppard Act. The Department understands 
that approximately 2,108 such leases may have existed in fiscal year 
2014.\14\ The Department has accordingly added 2,108 firms to its 
estimate, but notes that some of these firms may already be counted in 
the GSA estimate. We assume these entities are in the ``retail trade'' 
and ``accommodation and food services'' industries.
---------------------------------------------------------------------------

    \14\ http://www2.ed.gov/programs/rsarsp/index.html.
---------------------------------------------------------------------------

    SBA Advocacy also provided estimates of operations and concessions 
on military bases. SBA Advocacy cites a phone call between Advocacy and 
the Army and Air Force Exchange Service to report 1,200 direct 
operations and 462 concessions operating on federal bases. The 
Department was unable to independently confirm these numbers.\15\ The 
Navy, the Marine Corps, and the Coast Guard also have bases with retail 
and concessions contracts. The Department determined there are 523 Navy 
Exchanges,\16\ 2,250 Marine Corps Exchanges,\17\ and 114 \18\ Coast 
Guard Exchanges. Based on general information about services on bases, 
we assume these entities are in the ``retail trade'' and 
``accommodation and food services'' industries. We further assume that 
these entities, which appear to be providing nonprocurement services, 
are not listed in SAM.
---------------------------------------------------------------------------

    \15\ The Department did identify one source of data. Available 
at: http://www.aafes.com/Images/AboutExchange/factsheet.pdf.
    \16\ Navy Exchange data from Navy Exchange's Annual Report 2014. 
Available at: https://www.mynavyexchange.com/assets/Static/NEXCOMEnterpriseInfo/AR14.pdf.
    \17\ Marine Corps Exchanges Community Services. Available at: 
http://www.usmcmccs.org/about/.
    \18\ Coast Guard's Community Services Command. Available at: 
http://www.uscg.mil/csc/.
---------------------------------------------------------------------------

    In conclusion, the Department added some firms to the pool of 
affected business entities, but eliminated others. The Department added 
49,757 firms operating under contracts on federal lands or with leases 
in federal buildings or bases, based on our assumption that these were 
nonprocurement contractors not registered in SAM that might be covered 
by the Executive Order. Using more recent data to estimate the number 
of subcontractors led to the inclusion of 3,763 more subcontractors 
than in the NPRM. We also eliminated 128,541 firms that only receive 
federal grants mentioned above. In total, these revisions and updates 
reduced the number of firms by 75,021 (49,757 + 3,763-128,541). This 
Final Rule accordingly estimates 489,419 potentially affected firms. 
Table 2 summarizes the estimated number of affected contractors by 
contract nexus and industry used in this rulemaking.

                                                                       Table 2--Number of Potentially Affected Contractors
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                             NPS
                                                                        Total       Firms                                                  special     Forest       BLM       Public
                              Industry                               potentially   from SAM   Subcontractors        NPS         NPS CUAs     use      service     special   buildings   Federal
                                                                       affected      \a\           \b\          concessions       \c\      permits    SUAs \e\  recreation     \f\     bases \g\
                                                                        firms                                                                \d\                  permits
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing.....................................       8,525       8,428               13                0          0          0         84           0          0          0
Mining.............................................................       1,668       1,594               11                0          0          0         63           0          0          0
Utilities..........................................................       5,641       3,171               61                0          0          0      2,409           0          0          0
Construction.......................................................      61,399      52,410            8,770                0          0          0        219           0          0          0
Manufacturing......................................................      69,513      65,119            4,364                0          0          0         30           0          0          0
Wholesale trade....................................................      28,626      28,157              469                0          0          0          0           0          0          0
Retail trade.......................................................      17,682      12,446               52               73        906          0         34           0      1,670      2,501
Transportation and warehousing.....................................      17,780      11,881               93              153      1,900          0      3,754           0          0          0
Information........................................................      19,511      13,583              235                0          0          0      5,693           0          0          0
Finance and insurance..............................................       2,712       2,682               30                0          0          0          0           0          0          0
Real estate and rental and leasing.................................      20,705      20,699                6                0          0          0          0           0          0          0
Professional, scientific, and......................................     101,538      93,481            7,562                0          0          0        496           0          0          0
Management of companies............................................         264         264                0                0          0          0          0           0          0          0
Administrative and waste services..................................      33,374      30,375            2,086               50        621          0        241           0          0          0
Educational services...............................................      13,645      13,130              446                0          0          0         69           0          0          0
Health care and social assistance..................................      27,314      27,246               39                2         25          0          2           0          0          0
Arts, entertainment, and recreation................................      26,922       4,063                1               78        968     10,628      9,922       1,261          0          0

[[Page 67675]]

 
Accommodation and food services....................................      14,524       8,902                1               58        720          0      1,124           0      1,670      2,048
Other services.....................................................      18,077      17,679              113                4         50          0        232           0          0          0
                                                                    ----------------------------------------------------------------------------------------------------------------------------
    Total private..................................................     489,419     415,310           24,352              418      5,190     10,628     24,370       1,261      3,340      4,549
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ GSA's System for Award Management (SAM) for August 2015.
\b\ USASpending.gov FY2011-FY2015.
\c\ Total CUAs from NPS, adjusted for firms holding more than one permit using the ratio from NPS concessions.
\d\ Total SUAs from NPS. Assumed same proportion as the FS SUAs are covered and the same proportion as NPS concessions are unique.
\e\ Forest Service provided a count of permits at the end of FY2015. Use ratio of unique firms to all firms from NPS concessions.
\f\ Retail and concession leases in public buildings. Provided by SBA Advocacy and U.S. Department of Education.
\g\ Direct operations and concessions on federal bases. Army and Air Force Exchange Service (AAFES) firms provided by SBA Advocacy. Navy Exchange data from Navy Exchange's Annual Report 2014.
  Marine Corps Exchange data from Marine Corp Community Services. Coast Guard Exchange data from Coast Guard's Community Services Command.

    The Chamber/IFA also argued that the Department's analysis in the 
NPRM is internally inconsistent because we estimated 1.2 million 
potentially affected employees and 543,900 potentially affected 
contractors, which results in an average of 2.1 potentially affected 
employees per contracting firm. The Department believes this perceived 
inconsistency is the result of inappropriately dividing the number of 
potentially affected employees by 543,900. There are three primary 
reasons why the 543,900 figure is not the appropriate denominator when 
calculating the average number of employees per contracting firm.
    First, as explained in the NPRM, 81 FR 9641, the estimated number 
of potentially affected contractors includes those that only work on 
Walsh-Healey Public Contracts Act (PCA) contracts, which will not be 
affected by the rulemaking, and whose employees thus have been excluded 
from the estimate of affected employees. These contractors remain in 
the estimate of affected contractors in the Final Rule because the 
Department believes they may accrue some limited regulatory 
familiarization costs to determine that they are not impacted by the 
Final Rule. However, these contractors will not have affected 
employees.
    Second, as also explained in the NPRM, 81 FR 9641, some firms 
listed in the SAM database may not currently hold government contracts 
but are enrolled in SAM because they have held government contracts in 
the past or are interested in applying for contracts. These firms were 
kept in the analysis because some may bid on and be awarded future 
contracts. However, since others will not, affected workers should not 
be distributed to those firms (i.e., some of these firms will not have 
affected employees). Third, the NPRM analysis included firms listed in 
the SAM database that only hold, or wish to hold, government grants. 
Firms applying only for grants were eliminated from the estimated 
number of affected firms in this Final Rule because they will not 
accrue any costs.
    When preparing the analysis of the proposed rule, the Department 
had not identified an appropriate method to eliminate contracting firms 
with contracts only on Walsh-Healey PCA contracts or without Federal 
contracts to estimate the number of contracting firms with affected 
employees. For this Final Rule, the Department has identified a 
methodology to estimate the number of contractors with potentially 
affected employees.\19\ This methodology counts only contractors with 
service (including construction) contracts in USASpending in FY2015 
because these are the procurement contractors with potentially affected 
employees, and adds entities operating under covered nonprocurement 
contracts on Federal property or lands. We estimate there are 165,987 
such contractors (91,878 prime contractors in USASpending, 24,352 
subcontractors, and 49,757 entities with contracts on Federal property 
or lands). If this is used as the denominator, which we think would be 
reasonable, then we estimate an average of 10.4 full-year employees 
working exclusively on covered contracts per contracting firm. It is 
important to note, however, that this is not an estimate of the average 
number of total employees at these potentially affected contracting 
firms since only a segment of a contracting firm's workforce may work 
on covered Federal contracts.
---------------------------------------------------------------------------

    \19\ This methodology plus one additional step is used in the 
FRFA to estimate the number of small contractors with affected 
employees because these contractors are a subset of the contractors 
with potentially affected employees.
---------------------------------------------------------------------------

iii. Number of Potentially Affected Employees
    There are no data on the number of employees working on Federal 
contracts; therefore, to estimate the number of Federal contract 
employees, the Department employed the approach used in the Minimum 
Wage Executive Order Final Rule.\20\ The Department estimated the 
number of employees who work on federal contracts that will be covered 
by the Executive Order, representing the number of ``potentially 
affected employees.'' Additionally, the Department estimated the share 
of potentially affected employees who will receive new or additional 
paid sick leave as a result of the Executive Order. These employees are 
referred to as ``affected.'' \21\
---------------------------------------------------------------------------

    \20\ See 79 FR 60634, 60692-60720.
    \21\ Some workers with seven days of paid sick leave may still 
be affected if the Executive Order entitles them to use paid sick 
leave for additional purposes. However, data are not available to 
estimate these workers.
---------------------------------------------------------------------------

    The Department estimated the number of potentially affected 
employees in two parts. First, we estimated employees working on SCA 
and DBA procurement contracts. Second, we estimated the number of 
potentially affected employees on nonprocurement concessions contracts 
and contracts on Federal property or lands (some of which would also be 
SCA-covered). SCA and DBA contract employees on covered procurement 
contracts were estimated by taking the ratio of Federal contracting 
expenditures (``Exp'') to total output (Y), by industry. Total output 
is the market value of the goods and services produced by an industry. 
This ratio is then applied to total private employment in that industry 
(``Emp'')

[[Page 67676]]

(Table 3). This analysis was conducted at the 2-digit NAICS level.\22\
---------------------------------------------------------------------------

    \22\ The North American Industry Classification System is a 
method by which Federal statistical agencies classify business 
establishments in order to collect, analyze, and publish data about 
certain industries. Each industry is categorized by a sequence of 
codes ranging from 2 digits (most aggregated level) to 6 digits 
(most granular level). United States Census Bureau. ``North American 
Industry Classification System: Introduction to NAICS.'' U.S. 
Department of Commerce. Available at: http://www.census.gov/eos/www/naics/.
[GRAPHIC] [TIFF OMITTED] TR30SE16.003

    The Department used total Federal contracting expenditures from 
USASpending.gov data, which tabulates data on Federal contracting 
through the Federal Procurement Data System--Next Generation (FPDS-NG). 
The Congressional Budget Office (CBO) has stated that this is the 
``only comprehensive source of information about federal spending on 
contracts.'' \23\ According to data from USASpending.gov, the 
government spent $555 billion on procurement contracts in FY2015. The 
Department excluded expenditures to state and local governments because 
government employees generally receive at least seven days of paid sick 
leave and because the DBA does not apply to construction performed by 
state or local government employees. The Department also excluded 
contracts performed outside the U.S. because the Final Rule only covers 
contracts to the extent they are performed in the U.S. These two 
adjustments reduce the relevant Federal government's expenditures to 
$508 billion. Next, the Department excluded expenditures on goods 
purchased by the Federal government because the Final Rule does not 
apply to contracts subject to the Walsh-Healey PCA and hence would not 
apply to contracts for the manufacturing and furnishing of materials 
and supplies.\24\ Contracts for goods were identified in the 
USASpending.gov data if the product or service code begins with a 
number (services begin with a letter). Subtracting Federal expenditures 
on goods purchased, the Department found that the Federal government 
spent $286.4 billion on services (including construction) provided by 
government contractors in FY2015.
---------------------------------------------------------------------------

    \23\ Congressional Budget Office. (2015). Federal Contracts and 
the Contracted Workforce. p. 3. Available at: https://www.cbo.gov/publication/49931.
    \24\ For example, the government purchases pencils; however, a 
contract solely to purchase pencils (whether covered by the Walsh-
Healey PCA or not) would not be covered by the Executive Order.
---------------------------------------------------------------------------

    To determine the share of all output associated with government 
contracts the Department divided industry-level contracting 
expenditures by that industry's gross output.\25\ For example, in the 
information industry, $8.1 billion in contracting expenditures was 
divided by $1.6 trillion in total output, resulting in an estimate that 
covered government contracts comprise 0.52 percent of every dollar of 
total output in the information industry. The Department then 
multiplied the ratio of covered-to-gross output by private sector 
employment to estimate the share of employees working on covered 
contracts for each 2-digit NAICS industry. Private sector employment is 
from the 2015 Occupational Employment Statistics (OES).\26\ To 
demonstrate, in the information industry, there were approximately 2.7 
million private sector employees in May 2015 and covered government 
contracts comprise 0.52 percent of every dollar of total output. The 
Department multiplied 2.7 million by 0.52 percent to estimate that 
14,000 employees on covered procurement contracts in the information 
industry will be potentially affected by the Executive Order.\27\
---------------------------------------------------------------------------

    \25\ Bureau of Economic Analysis, National Income and Product 
Accounts (NIPA) Tables, Gross Output. 2015. ``Gross output of an 
industry is the market value of the goods and services produced by 
an industry, including commodity taxes. The components of gross 
output include sales or receipts and other operating income, 
commodity taxes, plus inventory change. Gross output differs from 
value added, which measures the contribution of the industry's labor 
and capital to its gross output.''
    \26\ Bureau of Labor Statistics. Occupational Employment 
Statistics. May 2015. Available at: http://www.bls.gov/oes/.
    \27\ Note that number of employees aggregated across industry 
analysis does not match the total number of employees derived using 
totals due to the order of multiplying and summing.
---------------------------------------------------------------------------

    Commenters claimed that independent contractors are not represented 
in these data. For example, the Chamber/IFA wrote ``the Department's 
analysis fails to account for independent contractors who will be 
treated as equivalent employees under the proposal.'' The Department 
notes that the OES includes incorporated independent contractors, and 
thus such independent contractors are included in the analysis. 
Unincorporated independent contractors are unlikely to be covered by 
this rule because, assuming they are bona fide independent contractors, 
they are not covered by the FLSA, and are unlikely to be performing 
work on or in connection with SCA- or DBA-covered contracts. Thus, they 
continue to be excluded in the Final Rule.
    This Final Rule makes clear that contract workers with the U.S. 
Postal Service are covered by this rulemaking. These workers are 
included in the OES employment data for the transportation and 
warehousing industry and these contracts are included in 
USASpending.gov data.\28\ Therefore, workers covered by these contracts 
are captured in the methodology above.
---------------------------------------------------------------------------

    \28\ The Department excludes from the OES data the 615,100 
workers in NAICS 491110 who are Federal postal service employees but 
includes workers in NAICS 492000: Couriers and Messengers.
---------------------------------------------------------------------------

    This methodology represents the number of year-round potentially 
affected employees who work exclusively on covered Federal contracts. 
Thus, when we refer to potentially affected employees in this analysis 
we are referring to this illustrative number of year-round potentially 
affected employees who work exclusively on covered government 
contracts. The number of employees who will gain benefits will likely 
exceed this number since all workers may not work exclusively on 
Federal contracts. However, data are not available to estimate the 
number of employees gaining benefits. Implications of this for costs 
and

[[Page 67677]]

transfers are discussed in the relevant sections.

                                                    Table 3--Number of Potentially Affected Employees
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Covered       Share      Employees    Employees
                                                                 Private       Total     contracting     output     on direct    on Federal     Total
                    Industry                         NAICS      employees      output       output        from      contracts    lands and     contract
                                                                 (1,000s)    (billions)   (millions)    covered      (1,000s)   concessions   employees
                                                                   \a\          \b\          \c\      contracting      \d\        (1,000s)     (1,000s)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry...........................           11          412         $454         $339        0.07%            0            0            0
Mining..........................................           21          811          426          105         0.02            0            0            0
Utilities.......................................           22          554          391        3,043         0.78            4            7           12
Construction....................................           23        6,393        1,320       24,194         1.83          117            1          119
Manufacturing...................................        31-33       12,303        5,940       20,703         0.35           43            0           43
Wholesale trade.................................           42        5,838        1,574          254         0.02            1            0            1
Retail trade....................................        44-45       15,751        1,610        1,263         0.08           12          107          120
Transportation & warehousing....................        48-49        4,789        1,071       11,005         1.03           49           98          147
Information.....................................           51        2,749        1,571        8,146         0.52           14           19           34
Finance and insurance...........................           52        5,666        2,275       18,734         0.82           47            0           47
Real estate and rental and......................           53        2,066        3,264        1,174         0.04            1            0            1
Professional, scientific, and...................           54        8,483        1,979      136,870         6.92          587            9          596
Management of companies.........................           55        2,260          629            0         0.00            0            0            0
Administrative and waste........................           56        8,882          891       29,781         3.34          297           18          315
Educational services............................           61        2,814          332        4,290         1.29           36            1           37
Health care and social assist...................           62       17,754        2,234       22,845         1.02          182            1          182
Arts, entertainment, and rec....................           71        2,243          311          103         0.03            1           14           15
Accommodation and food..........................           72       12,923          961        1,161         0.12           16           28           44
Other services..................................           81        4,010          672        2,387         0.36           14            1           15
                                                 -------------------------------------------------------------------------------------------------------
    Total private...............................  ...........      116,702       27,907      286,396         1.03        1,421          306        1,727
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ OES May 2015.
\b\ Bureau of Economic Analysis, NIPA Tables, Gross output. 2015.
\c\ USASpending.gov. Contracting expenditures for covered contracts in FY2015.
\d\ Assume share of expenditures on contracting is same as share of employment. Assumes all employees work exclusively on Federal contracts. Thus this
  may be an underestimate if some employees are not working entirely on Federal contracts.

    The above analysis, which largely follows the NPRM, found 1.4 
million potentially affected employees associated with contracting 
expenditures by the Federal government. However, as pointed out by SBA 
Advocacy and the Chamber/IFA, the rulemaking also covers entities 
operating under covered nonprocurement contracts on Federal property or 
lands and these workers may not be represented above. To account for 
these employees the Department used a variety of sources. First, the 
Department estimated the number of entities operating under covered 
nonprocurement contracts on Federal property or lands (section 
V.B.ii.). Then the Department multiplied the number of contracting 
firms by the number of potentially affected employees per contracting 
firm by industry. Conceptually, this ratio was calculated by dividing 
the potentially affected employees on direct contracts identified above 
(1.4 million across all industries) by the 116,200 estimated number of 
prime contractors and subcontractors with potentially affected 
employees from USASpending (91,900 prime contractors in and 24,400 
subcontractors) (V.B.ii.). However, this calculation was conducted at 
the industry level and summed over industries. For example, in retail 
trade, we estimate 12,000 potentially affected workers in 597 entities 
(545 prime plus 52 subcontractors), for an average of 20.7 potentially 
affected workers per firm. This estimate of potentially affected 
workers per firm is multiplied by the estimated 5,184 entities 
operating under covered nonprocurement contracts on Federal property or 
lands in the retail trade industry, resulting in 107,000 potentially 
affected employees in these firms. Summing these calculations over all 
industries results in an additional 306,000 covered employees for a 
total of 1.7 million potentially affected employees.
    Because the Executive Order only applies to ``new contracts,'' 
coverage of the estimated total number of potentially affected 
employees (1.7 million) will occur on a staggered year-by-year basis. 
The Department accordingly needed to devise a method to estimate at 
what rate the staggered coverage would occur. The Executive Order 
defines a new contract to be either one for which a solicitation has 
been issued, or for which the contract has been awarded outside the 
solicitation process, on or after January 1, 2017. Consistent with the 
Department's approach in the rulemaking implementing Executive Order 
13658, see 79 FR 34568, 34596, 60693, the Department estimated that 
twenty percent of contracts will qualify as ``new'' in Year 1. If 
approximately twenty percent of contracts are new each year, then 
almost all contracts should qualify as new for purposes of the 
Executive Order by Year 5.\29\ The Department assumed employee coverage 
would also occur on a uniform twenty percent year-by-year basis. The 
Department accordingly multiplied the 1.7 million total potentially 
affected employees by 0.2 to estimate that 345,000 employees may be 
impacted in Year 1. In Years 2 through 5 a slightly larger number of 
workers will be impacted due to projected employment growth.\30\
---------------------------------------------------------------------------

    \29\ If some contracts last longer than 5 years, then not all 
contracts will be covered by Year 5. For example, U.S. Forest 
Service contracts for ski resorts can last 20 years or more.
    \30\ The Department applied the geometric annual growth rate 
based on the ten-year employment projection for 2014 to 2024 from 
BLS' Employment Projections program by industry. Available at http://www.bls.gov/news.release/ecopro.t02.htm.
---------------------------------------------------------------------------

    The Chamber/IFA questioned the Department's estimate of affected 
employees in the NPRM on multiple grounds. As discussed below, the 
Department disagrees with the commenters. First, the Chamber/IFA 
believes the Department may have underestimated the number of affected 
employees because the ``estimate is based only on consideration of 
numbers of employees who may currently lack access to 7 days of paid 
leave, and it ignores the impact on thousands more employees and their 
employers because current programs offering 7 or more

[[Page 67678]]

days of leave fail to match other prescriptive details of the proposed 
rule.'' Employers that offer seven days of paid sick leave but with 
more restrictive usage will be required to broaden the use of their 
paid sick leave policies in response to the rulemaking. For instance, 
to the extent the employer's policy does not allow employees to use 
paid sick leave for absences related to domestic violence, the policy 
would need to be revised to comply with the Order and part 13. 
Therefore, the Department agrees these workers may be beneficiaries of 
this Final Rule. Although, as discussed below, the Department was able 
to calculate imprecise estimates of the number of additional affected 
employees, it has not included the costs or transfers associated with 
these employees for two main reasons. First, the Department found no 
applicable evidence to estimate the number of employees with paid sick 
leave that have a more restrictive scope of use than required in this 
Final Rule. Second, no strong evidence is available to estimate the 
impact on the number of days of paid sick leave taken for these 
employees who currently have a more restrictive scope of use in their 
current paid sick leave access. Therefore, they are not included in the 
analysis.
    However, the Department identified some data appropriate for 
illustrative estimates. According to the 2010 National Paid Sick Days 
Study (NPSDS), 64 percent of workers have paid sick days but only 47 
percent have paid sick days they are allowed to use to care for sick 
family members.\31\ If we assume workers with paid sick leave that can 
only be used for their own health are uniformly distributed across days 
of paid leave then we can estimate the number of affected employees due 
to expanded usage eligibility. We estimate 123,300 workers (115,700 
full-time + 7,600 part-time) receive 7 days or more of paid sick leave 
and thus will not receive additional days of paid leave.\32\ If 27 
percent ((64 percent-47 percent)/64 percent) of these employees have 
greater access to their paid sick leave due to expanded eligibility, 
then an additional 32,800 employees may be considered ``affected'' in 
Year 1 (an increase of 15 percent in Year 1). However, according to the 
data from the American Time Use Survey, analyzed by the Council of 
Economic Advisors,\33\ 53 percent of workers have paid sick days that 
can be used for their own illness and 48 percent have paid sick days 
that can be used to care for family members. As noted above, the 
Department estimated that 123,300 potentially affected employees 
receive 7 days or more of paid sick leave. If 9.4 percent ((53 percent-
48 percent)/53 percent) of these employees have usage extended then an 
additional 11,600 employees may be considered ``affected'' in Year 1, 
(a 5.2 percent increase in the number of affected employees).\34\ 
Therefore, depending on the source, the estimate of the incremental 
number of affected employees due to expanded usage varies between 
11,600 and 32,800 employees.\35\
---------------------------------------------------------------------------

    \31\ Smith, T.W. and Kim, J. (2010). Paid Sick Days: Attitude 
and Experiences. Public Welfare Foundation.
    \32\ Based on estimates from 2015 NCS, 2011 ATUS, and 2015 CPS. 
See section V.B.iv. for details.
    \33\ The Council of Economic Advisers. (2014). The Economics of 
Paid and Unpaid Leave.
    \34\ This assumes all workers who have paid leave to care for 
family members can use this leave to care for themselves.
    \35\ This is potentially an underestimate since it does not 
include any impacts due to additional uses allowed under this Final 
Rule, such as domestic violence. The Department found no data on 
current coverage for any additional uses to include in the estimate 
of additional ``affected'' employees.
---------------------------------------------------------------------------

    The second Chamber/IFA concern is that the Department is 
underestimating affected employees because ``if government contract 
work is more labor intensive per dollar expended than non-governmental 
activity, then the number of affected employees will be . . . 
commensurately greater than the numbers estimated by the Department in 
its analysis.'' The Department calculated the number of employees based 
on the share of government expenditures to all expenditures by 
industry. Overall, the Department believes that services provided for 
the government will not be any more or less labor intensive than 
services provided for the private sector However, within industries, 
government contract work could be more or less labor intensive than 
private contract work. For example, because federal contracts for 
construction services are more likely to be heavy or highway 
construction, government contract work could involve different levels 
of labor intensity than private contract work in the construction 
industry. The Department believes that the differences in labor 
intensity between contracted and non-contracted sectors across 2-digit 
NAICS tend to balance each other out.
    Third, the Chamber/IFA believes affected employees may be 
underestimated because the Department assumed that employees were 
working exclusively on Federal contracts. To the extent that employees 
spend only a portion of their time working on federal contracts, the 
number of affected employees will be higher than the number of year-
round exclusively federal contract employees estimated above. As 
discussed above, data are not available on the share of an employee's 
time that is spent on Federal contracting. The impact of this on 
transfers was discussed in the NPRM and in this Final Rule in the 
section on transfers (V.C.iii.). For this Final Rule we have added a 
discussion regarding the impact on costs (V.C.ii.).
    Fourth, the Chamber/IFA repeatedly stated that the Department 
should have conducted a baseline survey of contracting firms to obtain 
information about the prevalence of the ``15 plus specific elements'' 
required by the Rule. The commenters claim that the Department could 
have conducted a survey ``following the issuance of Executive Order 
13706 in September 2015'' and ``still be on schedule to complete the 
contemplated rulemaking by September 30, 2016.'' The Department 
believes that conducting such a survey is unnecessary because existing 
data provides the information necessary to calculate reasonable 
estimates of the total costs and transfers of this Final Rule.
iv. Number of Affected Employees
    The Department used the 2015 National Compensation Survey (NCS) to 
determine the proportion of potentially affected employees who already 
receive paid sick leave. The NCS estimates that nationally 61 percent 
of all private sector employees currently receive some paid sick 
leave.36 37 However, this average can vary substantially by 
industry and hours worked. To account for these differences the 
Department performed its analysis by industry and full-time/part-time 
status.\38\ The BLS reports the share of employees who receive paid 
leave disaggregated by industry and separately by full-time status 
(Table 4). However, the NCS does not publish data cross-tabulated by

[[Page 67679]]

industry and full-time status. For this Final Rule the BLS provided 
this breakdown using the NCS microdata for categories with sufficient 
observations to meet their publication criteria. For industries not 
available from the NCS by part-time status, the Department estimated 
the rates.\39\ The NCS does not include employees in the agriculture, 
forestry, fishing and hunting industries; therefore, the Department 
estimated the share of employees with access to paid sick leave in 
those industries based on the 2011 ATUS Leave Module.\40\
---------------------------------------------------------------------------

    \36\ National Compensation Survey, March 2015, Table 32. Leave 
benefits: Access, private industry employees.
    \37\ Data on paid sick leave are not available specifically for 
Federal contractors. The Department assumes rates of paid sick leave 
for Federal contractors are similar to all private sector workers.
    \38\ The Department's analysis categorizes as full-time those 
individuals who work 32 hours or more per workweek (rounded to the 
nearest integer). 32 hours represents the line of demarcation 
between workers who would and would not accrue 56 hours of paid sick 
leave a year if they work a full year. The Department's designation 
herein of certain individuals as ``full-time'' and other individuals 
as ``part-time'' based on their usual hours worked is solely for 
purposes of facilitating the economic analysis in this rulemaking.
    \39\ The Department used the share of employees with sick leave, 
for all employees and full-time employees, and the ratio of full-
time to part-time employees in each industry to estimate the shares 
for part-time employees in those industries without part-time 
employees' shares. The Department used data from the CPS to 
calculate the ratio of full- to part-time employees. For example, 
the NCS does not provide an estimate of the percentage of part-time 
workers in the manufacturing industry with paid sick leave. NCS 
provides estimates of 65 percent and 67 percent of all and full-time 
workers, respectively, have some paid sick leave in the 
manufacturing industry. Based on the 2015 CPS data, the Department 
estimated that about 96% of workers in the manufacturing industry 
work full-time. Since the 65 percent total is a weighted average of 
full-time and part-time workers with paid sick leave, we estimated 
the percentage of part-time workers in the manufacturing industry 
with paid sick leave by solving for ``PT%'' in:
    0.65 = (0.67*0.959) + (PT%*0.041).
    \40\ The 2011 ATUS Leave Module is a special supplement to the 
annual ATUS survey sponsored by the BLS and conducted by the U.S. 
Census Bureau. It surveys employees nationally on use of leave. The 
Department estimated the share of workers in the agriculture, 
forestry, fishing and hunting industries that receive paid sick 
leave. The ratio of leave benefits for full-time and part-time 
workers from the NCS was applied to this total to estimate separate 
rates for these two subgroups.

                Table 4--Share of Employees With Paid Sick Leave by Industry and Full-Time Status
----------------------------------------------------------------------------------------------------------------
                                                                            % With some paid sick leave
                                                                 -----------------------------------------------
                    Industry                           NAICS                        Full-Time b     Part-Time b
                                                                   Total a  (%)         (%)             (%)
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting c....              11              18              21               7
Mining..........................................              21              64              65            d 27
Utilities.......................................              22              89              89            d 89
Construction....................................              23              41              42              25
Manufacturing...................................           31-33              65              67            d 18
Wholesale trade.................................              42              77              80            d 41
Retail trade....................................           44-45              50              73              27
Transportation and warehousing..................           48-49              74              75              73
Information.....................................              51              92              95              51
Finance and insurance...........................              52              90              93              57
Real estate and rental and leasing..............              53              72              80            d 36
Professional, scientific, and technical services              54              78              85            d 26
Management of companies and enterprises.........              55              90              91            d 81
Administrative and waste services...............              56              44              53              15
Educational services............................              61              73              90              24
Health care and social assistance...............              62              72              85              36
Arts, entertainment, and recreation.............              71              48              71              29
Accommodation and food services.................              72              25              46              11
Other services..................................              81              57              73              24
Total private...................................  ..............              61              73              25
----------------------------------------------------------------------------------------------------------------
a National Compensation Survey, March 2015, Table 32. Leave benefits: Access, private industry workers (unless
  otherwise noted). Assumes distribution of paid leave is similar for Federal contractors and other private
  employees.
b The NCS does not publish data by industry and full-time status; however, for this Final Rule the BLS provided
  this breakdown using the NCS microdata for industries with sufficient observations to meet their publication
  criteria. Full-time is defined as 32 or more hours per week.
c NCS does not include information for this industry. Used 2011 ATUS Leave Module to estimate share of employees
  in this industry with paid sick leave. Assumes distribution of paid leave is similar for Federal contractors
  and other private sector employees.
d NCS does not include information for this industry and part-time status. The Department estimated these rates.

    The Department estimated that of the 345,000 employees potentially 
impacted in Year 1, approximately 294,000 are full-time employees and 
51,400 are part-time employees.\41\ For full-time employees, across all 
industries, 73 percent receive some paid sick leave and 27 percent 
currently receive no paid sick leave. For part-time employees, 25 
percent receive some paid sick leave and 75 percent receive no paid 
leave. All employees with no paid sick leave will be affected 
regardless of how many hours per week they work (assuming they work a 
sufficient number of hours to accrue paid sick leave).
---------------------------------------------------------------------------

    \41\ Based on the share of workers who are full-time in the 2015 
CPS data. This assumes the share of government contractors that are 
full-time is similar to private industry overall. As noted, full-
time is defined for purposes of this analysis as 32 or more hours 
per week.
---------------------------------------------------------------------------

    Additionally, some employees who currently receive paid sick leave 
will also be affected by the Final Rule if they receive fewer than the 
mandated number of days based on the required accrual rate. To 
determine how many of these employees are affected, the Department used 
NCS data on the distribution of days of leave. The 2015 NCS provides 
the share of employees with a range of days of paid sick leave (e.g., 5 
to 9 days per year).\42\ The NCS publishes these data aggregated across 
all industries. However, since this analysis is conducted by industry, 
the BLS provided the Department with these ranges of days disaggregated 
by industry based on the NCS (see Appendix A). The Department then used 
the categorical distribution of days for all workers in an industry and 
full-time workers across industries to approximate these values for 
both full-time and part-time workers by industry.\43\ This results in a 
distribution by categories of days of sick leave by industry and full-
time status.
---------------------------------------------------------------------------

    \42\ Table 35. Paid sick leave: Number of annual days by service 
requirement, private industry workers, National Compensation Survey, 
March 2015. Available at: http://www.bls.gov/ncs/ebs/benefits/2015/ownership/private/table35a.htm.
    \43\ The distribution is available for all workers and full-time 
workers but not part-time workers. Combining these data with the 
share of workers who are full-time allowed the Department to 
approximate the distribution for part-time workers.
---------------------------------------------------------------------------

    The Department distributed the share of employees within each NCS 
category (e.g., 5 to 9 days per year) of paid sick leave days across 
the individual number of days in that category (e.g., 5, 6, 7, 8,

[[Page 67680]]

9) using a Poisson distribution that approximates the distribution of 
days of paid sick leave provided to workers with this benefit.\44\ For 
example, using the NCS data the Department estimates that 53 percent of 
full-time employees with paid sick leave receive 5 to 9 days of leave. 
Applying the Poisson distribution, the Department estimated 10 percent 
of employees with paid sick leave currently receive 5 sick days, 13 
percent currently receive 6 sick days, etc.\45\ The percent 
distributions of days of paid sick leave are presented in Appendix A.
---------------------------------------------------------------------------

    \44\ The Poisson distribution is frequently used for discrete 
count data. The data were consistent with a Poisson distribution. 
The distribution of days of sick leave is continuous but was 
approximated using integers to allow use of the Poisson distribution 
and to simplify the analysis. Aggregate findings would be highly 
comparable if a continuous distribution had been used instead.
    \45\ Some additional manipulations were made to the data in 
cases where the Poisson distribution resulted in numbers 
contradictory to the reported medians (see Appendix A).
---------------------------------------------------------------------------

    The Executive Order generally measures paid sick leave in hours, 
restricting a contractor from limiting total accrual of paid sick leave 
per year, or any point in time, at less than 56 hours. Because the NCS 
tabulates paid sick leave in days, the Department converted sick leave 
hours to days to use the NCS. The Department assumed a standard 8 hours 
worked per day, so the Executive Order provides a maximum accrual of 7 
days of paid sick leave annually. Therefore, this analysis assumes 
employees receiving at least 7 days of paid sick leave are not 
affected.\46\
---------------------------------------------------------------------------

    \46\ The number of days of leave for workers with paid time off 
policies is unknown. The NCS estimates the distribution of days of 
paid sick leave for workers with a set number of days of paid sick 
leave. We assume this distribution of days of leave is the same for 
workers with paid time off policies (and those with ``as needed'' 
paid sick leave provisions). This may result in an underestimate of 
the number of days currently received by workers with a paid-time 
off program because the SHRM (2008) estimates that workers with paid 
time off policies receive an average of 15 days the first year of 
service.
---------------------------------------------------------------------------

    To estimate the number of affected employees in Year 1 the 
Department summed the number of potentially affected employees with 
less than 7 days of paid sick leave. The Department estimates 114,600 
contract employees have no paid sick leave and will be affected. The 
Department also estimates 107,500 contract employees have access to 
paid sick leave but receive fewer than 7 days of paid sick leave (47 
percent of workers with some paid sick leave) and are thus classified 
as affected employees. The Department accordingly estimates that there 
will be approximately 222,100 affected employees in Year 1 (Table 5).
v. Number of Additional Days of Paid Sick Leave Accrued by Affected 
Employees
    The Department estimated the number of additional paid sick leave 
days the approximately 222,100 affected employees would need to receive 
for contractors to comply with the Executive Order. This was done 
somewhat differently for full-time and part-time employees. For full-
time employees with no paid sick leave the Department estimated they 
will receive 7 additional days of paid sick leave. For full-time 
employees with between 1 and 6 days of leave the Department estimated 
the number of additional days they would need to receive to reach 7 
days of paid sick leave (e.g., if they currently receive 1 day then 
they will receive an additional 6 days).
    To estimate the additional number of paid sick days per year that 
would accrue to part-time employees as a result of the rule, the 
Department first had to estimate hours of paid sick leave per year 
currently available to these workers. To estimate paid sick leave hours 
currently available to part-time employees required additional 
calculations because the NCS reports days of paid sick leave per year, 
not hours. Therefore, the Department adjusted part-time employees' days 
of paid sick leave by assuming that the hours of paid sick leave 
associated with ``one day'' of leave is equivalent to average hours 
worked in a day. For example, if a part-time worker averages 6 hours of 
work per work day, then one day of paid sick leave will also be equal 
to 6 hours. To do this, the Department divided part-time workers' 
average hours worked per week by 5 to calculate their average hours 
worked per day by industry. The Department then multiplied average work 
hours per day by NCS reported paid days of sick leave per year to 
estimate part-time employees' hours of paid sick leave currently 
available per year.
    Next, the Department calculated the total hours of paid sick leave 
per year that might accrue to a part-time worker as a result of this 
E.O. Because paid sick leave is accrued at a rate of 1 hour per every 
30 hours worked, the Department divided mean annual hours worked for 
part-time workers in an industry by 30 to estimate the number of hours 
of paid sick leave required under the Executive Order. The difference 
between hours of paid sick leave currently available per year and hours 
of paid sick leave per year required under the Executive Order is the 
additional hours that accrue to part-time workers. This was then 
divided by 8 to express the additional paid sick hours in terms of 
standardized 8-hour days. Table 7 presents the adjusted numbers for 
part-time employees.
    As stated above, the Department is estimating a total of 222,100 
affected employees in Year 1 (Table 5). The total number of additional 
days of paid sick leave is then calculated by multiplying the number of 
employees affected by the average number of additional days of paid 
sick leave provided by the Final Rule (Table 6 and Table 7). The 
Department estimated that the Final Rule will result in a total of 
968,000 additional days of paid sick leave provided (792,000 days for 
full-time workers and 176,000 days for part-time workers).\47\
---------------------------------------------------------------------------

    \47\ This estimate is based on the marginal number of paid sick 
days employers would have to provide due to this regulation. To the 
extent employers that currently provide paid sick leave do not 
modify their existing paid sick leave policies in accordance with 
section 2(g) of the Executive Order and section 13.5(f), and to the 
extent there are SCA- or DBA-covered employers who provide paid sick 
leave as an SCA or DBA fringe benefit, this estimate may not 
entirely reflect the total marginal number of days employers would 
have to provide. However, the Department assumes firms will be able 
to and will choose to apply the currently provided days of paid sick 
leave toward the requirements of the Executive Order and this rule, 
and the Department similarly understands that contractors generally 
do not provide paid sick leave as an SCA or DBA fringe benefit.

                                 Table 5--Number of Affected Employees in Year 1
----------------------------------------------------------------------------------------------------------------
                                                                Affected employees
                                --------------------------------------------------------------------------------
            Industry                                                              With no paid   With some  paid
                                      Total        Full-Time a     Part-Time a     sick leave       sick leave
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing               58              47              12              52                6
 and hunting...................
Mining.........................              39              37               1              20               18
Utilities......................             294             287               8             256               39

[[Page 67681]]

 
Construction...................          20,280          18,504           1,776          14,086            6,195
Manufacturing..................           6,372           6,045             327           3,009            3,363
Wholesale trade................             133             121              12              43               90
Retail trade...................          16,709          11,021           5,688           9,487            7,223
Transportation and warehousing.          15,609          13,857           1,752           7,427            8,182
Information....................           2,587           2,042             545             701            1,886
Finance and insurance..........           2,484           2,194             290             842            1,642
Real estate and rental and                   95              73              22              42               54
 leasing.......................
Professional, scientific, and            72,713          60,405          12,308          26,224           46,489
 technical serv................
Management of companies and                   0               0               0               0                0
 enterprises...................
Administrative and waste                 50,648          40,768           9,881          33,656           16,993
 services......................
Educational services...........           2,456           1,275           1,181           1,716              739
Health care and social                   19,587          14,554           5,033           8,601           10,985
 assistance....................
Arts, entertainment, and                  2,184           1,276             908           1,328              856
 recreation....................
Accommodation and food services           7,718           4,451           3,267           5,895            1,823
Other services.................           2,092           1,365             727           1,208              884
                                --------------------------------------------------------------------------------
    Total private..............         222,059         178,320          43,739         114,593          107,465
----------------------------------------------------------------------------------------------------------------
a Part-time is defined as working less than 32 hours per week.


          Table 6--Current Distribution of Days of Paid Leave, Additional Days of Leave, and Affected Employees in Year 1, Full-Time Employees
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Number of full-time potentially affected employees accruing  annually the                   Days
                                                                      following number of days of sick leave                      Affected    additional
                     Industry                      ----------------------------------------------------------------------------  employees    sick leave
                                                       0        1        2        3        4        5        6          7+                    available
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing....................       41        0        0        1        2        1        1            5           47          302
Mining............................................       19        0        0        0        0        3       15           18           37          157
Utilities.........................................      250        0        0        0        0        8       29        1,982          287        1,792
Construction......................................   12,626      154      475      980    1,515    1,448    1,307        3,265       18,504      104,346
Manufacturing.....................................    2,721       55      228      626    1,291      562      562        2,200        6,045       28,580
Wholesale trade...................................       35        1        5       15       30       18       16           53          121          480
Retail trade......................................    4,686      115      356      734    1,135    1,967    2,028        6,335       11,021       47,574
Transportation and warehousing....................    6,567       77      358    1,107    2,568    1,249    1,931       12,411       13,857       64,780
Information.......................................      295        8       38      116      270      516      799        3,865        2,042        5,409
Finance and insurance.............................      617        7       41      171      528      271      559        6,614        2,194        7,933
Real estate and rental and leasing................       24        1        3        7       11       13       13           49           73          294
Professional, scientific, and.....................   15,758      394    1,625    4,467    9,214   12,188   16,759       44,647       60,405      207,437
Management of companies...........................        0        0        0        0        0        0        0            0            0            0
Administrative and waste services.................   24,702      301    1,241    3,414    7,042    1,930    2,138       11,789       40,768      221,703
Educational services..............................      590        4       24       90      255      108      204        4,623        1,275        5,818
Health care and social assistance.................    4,505      152      628    1,726    3,561    1,676    2,305       15,482       14,554       58,835
Arts, entertainment, and recreation...............      574       19       58      119      185      158      163          702        1,276        5,929
Accommodation and food services...................    2,872       43      133      275      425      346      356          867        4,451       24,452
Other services....................................      580       11       47      129      265      140      192          784        1,365        6,146
                                                   -----------------------------------------------------------------------------------------------------
    Total private.................................   77,462    1,342    5,260   13,977   28,298   22,603   29,378      115,693      178,320      791,969
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers do not always add to total due to rounding.


          Table 7--Current Distribution of Days of Paid Leave, Additional Days of Leave, and Affected Employees in Year 1, Part-Time Employees
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Number of full-time potentially affected employees accruing  annually                   Days
                                                                      the following number of days of sick leave                  Affected    additional
                       Industry                        ------------------------------------------------------------------------  employees    sick leave
                                                           0        1        2        3        4        5        6        7+                 available a
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing & hunting..............       11        0        0        0        0        0        0        0           12           46
Mining................................................        1        0        0        0        0        0        0        0            1            5
Utilities.............................................        6        0        0        0        0        0        1       49            8           31
Construction..........................................    1,459       11       29       53       72       79       73      170        1,776        7,503
Manufacturing.........................................      288        1        3        7       13        7        7       24          327        1,381
Wholesale trade.......................................        9        0        0        1        1        1        1        2           12           45
Retail trade..........................................    4,801       22       59      107      145      292      264      888        5,688       23,165
Transportation and warehousing........................      860       13       51      140      285      171      232    1,433        1,752        5,730
Information...........................................      406        1        3        9       19       45       61      283          545        1,822
Finance and insurance.................................      225        0        2        7       19       13       23      234          290        1,196
Real estate and rental and leasing....................       17        0        0        1        1        1        1        5           22           81
Professional, scientific, and technical...............   10,467       22       78      189      343      548      662    1,842       12,308       47,125
Management of companies and...........................        0        0        0        0        0        0        0        0            0            0
Administrative and waste services.....................    8,954       23       83      200      363      120      137      653        9,881       42,049

[[Page 67682]]

 
Educational services..................................    1,127        0        2        7       18       10       16      301        1,181        4,671
Health care and social assistance.....................    4,096       19       69      167      302      172      208    1,367        5,033       20,469
Arts, entertainment, and recreation...................      754        5       15       27       37       37       33      154          908        3,302
Accommodation and food services.......................    3,023        9       23       42       58       55       57      130        3,267       14,564
Other services........................................      628        2        7       17       31       19       23       99          727        2,861
                                                       -------------------------------------------------------------------------------------------------
    Total private.....................................   37,132      127      426      975    1,708    1,570    1,802    7,635       43,739      176,048
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers do not always add to total due to rounding.
a This is expressed in terms of standardized 8-hour days, as described in the text.

    To estimate the number of affected employees in later years, the 
Department calculated the average annual geometric growth rate in 
employment based on the ten-year employment projection for 2014 to 2024 
from BLS' Employment Projections program. Table 8 shows the number of 
affected employees in Years 1 through 10, along with the number of 
employees with no paid sick leave currently, with some paid sick leave, 
and by full-time/part-time status. The share of employees working full-
time in 2015 and the share of employees with no paid sick leave were 
applied to projected years.

                                Table 8--Affected Employees in Years 1 Through 10
----------------------------------------------------------------------------------------------------------------
                                                            Affected employees (1,000s)
                                 -------------------------------------------------------------------------------
              Year                                                                                   With some
                                       Total         Full-Time       Part-Time     With no paid      paid sick
                                                                                    sick leave         leave
----------------------------------------------------------------------------------------------------------------
Year 1..........................           222.1           178.3            43.7           114.6           107.5
Year 2..........................           454.0           364.6            89.4           234.3           219.7
Year 3..........................           686.1           551.0           135.1           354.1           332.0
Year 4..........................           918.3           737.4           180.9           473.9           444.4
Year 5..........................         1,150.6           924.0           226.6           593.8           556.8
Year 6..........................         1,161.0           932.3           228.7           599.1           561.9
Year 7..........................         1,171.5           940.7           230.7           604.5           566.9
Year 8..........................         1,182.1           949.3           232.8           610.0           572.1
Year 9..........................         1,192.8           957.9           235.0           615.6           577.3
Year 10.........................         1,203.7           966.6           237.1           621.2           582.5
----------------------------------------------------------------------------------------------------------------

    The Department estimates that once all covered contracts have been 
renewed (in Year 5), the equivalent of 1.2 million year-round 
exclusively federal contract employees will be affected by this Final 
Rule. The Economic Policy Institute developed a range of estimates that 
are comparable; they found that ``between 694,000 and 1,053,000 
employees of Federal contractors may directly benefit with additional 
paid sick leave.'' Their estimates use data from the General Services 
Administration's (GSA's) Federal Procurement Data System, the BLS' 
Employment Requirements Matrix, and the BLS' NCS. EPI's estimated 
number is consistent with the Department's estimate in the NPRM because 
both estimates included only employees working on contracts in 
USASpending.gov. As noted previously, the Department added employees 
working on contracts on Federal property or lands in the analysis of 
this Final Rule, which increased the estimated number of affected 
employees.

C. Impacts of Final Rule

i. Overview
    This section presents direct employer costs, transfer payments and 
DWL associated with the Final Rule. These impacts were projected for 10 
years. The Department estimated average annualized direct employer 
costs of $27.3 million, transfer payments of $349.6 million and DWL of 
$734,000. As these numbers demonstrate, the largest quantified impact 
of the Final Rule will be the transfer of income from employers to 
employees. The Department also discusses the many benefits of this rule 
qualitatively.
ii. Costs
    The Department quantified three direct employer costs: (1) 
Regulatory familiarization costs; (2) implementation costs; and (3) 
recurring administrative costs. Other employer costs are considered 
qualitatively. This section explains the methodology and responds to 
commenters. Some commenters believe our costs estimates are too low; 
where appropriate, estimates were adjusted. Other commenters provided 
evidence from state and municipal laws demonstrating that costs will be 
low. For instance, the Seattle Office of Labor Standards cited a study 
that found the costs of the Seattle paid leave law have been modest, 
stating: ``[T]here is no evidence that the Ordinance caused employers 
to go out of business, and 70% of employers were either ``somewhat'' or 
``very'' supportive of the Ordinance.'' \48\ They also cite a study by 
the Main Street Alliance of Washington that found ``no evidence of 
widespread negative economic impacts.'' \49\ Similarly, many commenters 
submitted a form letter that cites the Vice

[[Page 67683]]

President of the San Francisco Chamber of Commerce saying that the San 
Francisco law's impact on employers was ``minimal'' (due to responses 
by employers that allow them to lower costs, such as having current 
employees cover for others using paid sick leave instead of hiring 
replacement labor).\50\ These commenters also cited research finding 
that the Connecticut paid sick leave ``law had a minimal impact on 
costs'' \51\ for employers. The Leadership Conference on Civil and 
Human Rights cited research showing that ``CEOs support paid sick time 
73 percent to 16 percent, and support `more time off to take care of 
sick children or other relatives' 83 percent to 5 percent.'' \52\
---------------------------------------------------------------------------

    \48\ Romich, J., Bignell, W., Brazg, T, Johnson, C., Mar, C., 
and et al. (2014). Implementation and Early Outcomes of the City of 
Seattle Paid Sick and Safe Time Ordinance. University of Washington. 
Available at: http://www.seattle.gov/Documents/Departments/CityAuditor/auditreports/PSSTOUWReportwAppendices.pdf.
    \49\ Main Street Alliance of Washington. (2013). Paid Sick Days 
and the Seattle Economy: Job Growth and Business Formation at the 1-
year Anniversary of Seattle's Paid Sick and Safe Leave Law. 
Available at: http://www.seattle.gov/Documents/Departments/CivilRights/psst-report-main_street_alliance.pdf.
    \50\ Swarns, R. (2014). Despite Business Fears, Sick-Day Laws 
Like New York's Work Well Elsewhere. New York Times. Available at: 
http://www.nytimes.com/2014/01/27/nyregion/despite-business-fears-sick-day-laws-like-new-yorks-work-well-elsewhere.html.
    \51\ Appelbaum, E., Milkman, R., Elliott, L., and Kroeger, T. 
(2014). Good for Business? Connecticut's Paid Sick Leave Law. Center 
for Economic and Policy Research and The Murphy Institute at the 
City University of New York Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
    \52\ Bottari, M. (2016). Highlights of Luntz Poll of American 
CEOs Shows Broad Support for Progressive Policies, PRWatch, Center 
for Media and Democracy.
---------------------------------------------------------------------------

1. Regulatory Familiarization Costs
    The Final Rule will impose direct costs on covered contractors by 
requiring them to review the regulation. The Department believes that 
all Federal contracting firms that have or expect to have covered 
contracts will incur regulatory familiarization costs because all 
establishments will need to determine whether they are in compliance. 
As explained above, in response to comments the Department revised the 
number of potentially affected contracting firms to include entities 
operating on Federal lands and property. See section V.B.ii. for a 
description of the number of these potentially affected contracting 
firms. The Department estimated in the NPRM, based on the GSA's SAM 
data in August 2015, that there were 543,900 Federal contracting firms.
    In the NPRM the Department included contracting firms strictly 
providing materials and supplies to the government and other firms with 
no Federal contracts covered by the Executive Order because they may 
incur some regulatory familiarization costs.\53\ However, the 
Department also noted that these firms may not incur regulatory 
familiarization costs, resulting in an overestimate of the number of 
potentially affected contractors. The Chamber/IFA wrote that the 
Department's estimate of regulatory familiarization costs is based on 
the assumption that ``only successful contract bidders will incur 
familiarization cost.'' To clarify, our estimate includes firms that 
are registered in SAM but that do not have covered contracts. Thus, it 
includes most firms serious about bidding. The Chamber/IFA also wrote: 
``Even contractors exempt from the proposed rule for some reason will, 
first, have to review the regulation and their own book of contracts 
(and prospective bids) to make such a determination.'' The Department 
acknowledges these firms may still incur some minimal regulatory 
familiarization costs and has therefore included them in the estimate 
of potentially affected contactors.
---------------------------------------------------------------------------

    \53\ In addition, at the time the NPRM was prepared, the 
Department had not developed a method to estimate and exclude firms 
strictly providing materials and supplies to the government and 
firms without Federal contracts. The Department has since devised a 
method to identify and exclude such firms which is done when 
estimating the number of contractors with affected employees.
---------------------------------------------------------------------------

    In the NPRM the Department assumed one hour of a human resources 
manager's time will be spent reviewing the rulemaking. Some commenters 
believe this is an underestimate. The Chamber/IFA wrote ``experience 
based on other recent regulations . . . shows that the initial 
familiarization process entails many hours of involvement by a variety 
of company executives, attorneys and consultants.'' TrueBlue, Inc. 
wrote: ``We have already spent well more than [one hour] trying to 
decipher this rule.'' In response to these comments, the Department has 
increased this estimate to two hours per firm. The Department also 
notes that the time estimate is an average over all firms the 
Department has identified as potentially affected. As stated in the 
previous paragraph, the estimate includes firms expected to have very 
minimal or no regulatory familiarization costs such as contractors only 
holding or bidding on contracts for products. Thus, while some firms 
presumably will spend more than two hours on regulatory 
familiarization, the Department believes that the average amount of 
time potentially affected contractors will spend on regulatory 
familiarization is two hours.
    The Chamber/IFA also wrote that ``[t]here may be circumstances 
under which a familiarization effort may require repetition. For 
example, a large firm with decentralized contract teams, may find that 
multiple familiarization activities occur as different teams within the 
company make independent bid decisions on different contract 
opportunities.'' However, the commenters provided neither evidence of 
the prevalence of these circumstances nor an average number of teams 
per firm with these circumstances. The Department accordingly cannot 
confirm how commonly, if at all, this scenario will occur. Even 
assuming it does, the Department lacks the data to make an estimate 
related to additional familiarization costs.
    The cost of this time is the mean wage for a human resource manager 
of $82.17 per hour.\54\ In the NPRM, based on 2014 data, this wage rate 
was $79.96. The Chamber/IFA believes this is too low because it does 
not include the ``full economic opportunity cost.'' It suggests that a 
``practical approximation may be provided by the indirect overhead and 
profit mark-ups relative to direct labor cost that government contracts 
permit.'' Thus, the Chamber/IFA believes direct wages should be 
multiplied by 3.25 instead of the 1.46 used in the proposed rule.
---------------------------------------------------------------------------

    \54\ This includes the mean base wage of $56.29 from the 
Occupational Employment Statistics (OES) plus benefits paid at a 
rate of 46 percent of the base wage, as estimated from the BLS's 
Employer Costs for Employee Compensation (ECEC) data. OES data 
available at: http://www.bls.gov/oes/current/oes113121.htm.
---------------------------------------------------------------------------

    The Department disagrees with the mark-up rate suggested by the 
Chamber/IFA because it is not appropriate to apply a load factor used 
on direct labor costs to indirect labor. That is, the markup rate 
suggested by the commenters includes indirect overhead labor (i.e., 
time for human resource workers), and it is inappropriate to mark-up 
that indirect cost (i.e., HR workers' wages) for indirect costs (e.g., 
additional HR time). The Department also disagrees with the mark-up 
rate suggested by the commenters because the relatively small costs of 
this rulemaking (relative to payroll or revenue, see section V.C.vii.) 
are likely to have little to no effect on the cost of overhead and 
support services in addition to the overhead costs estimated in this 
cost section. Most overhead costs are largely fixed and will be 
unaffected. For example, building rent, heat and electricity are 
unlikely to change. For these reasons, the Department has continued to 
use the NPRM mark-up rate in the Final Rule.\55\
---------------------------------------------------------------------------

    \55\ The Department acknowledges that there might be overhead 
costs and thus conducted a sensitivity analysis using an additional 
overhead rate of 17 percent. This rate is based on a Chemical 
Manufacturers Association Study and has been used in the 
Environmental Protection Agency's Final Rules (see for example, EPA 
Electronic Reporting under the Toxic Substances Control Act Final 
Rule, Supporting & Related Material). However, an overhead rate 
based on the chemical manufacturing industry may not be appropriate 
for all industries, and thus we present this estimate as an 
illustrative example. Adding an additional overhead rate of 17 
percent would increase total costs (regulatory familiarization 
costs, implementation costs, and administrative costs) by $14.6 
million in Year 1, an increase of 11.6 percent. As previously noted, 
the Department believes this overestimates the overhead costs 
attributable to this rulemaking, but recognizes that there is not a 
definitive approach to estimating the marginal cost of labor.

---------------------------------------------------------------------------

[[Page 67684]]

    Therefore, for this Final Rule, the Department has estimated 
regulatory familiarization costs to be $80.4 million ($82.17 per hour x 
2 hours x 489,400 contractors) (Table 9). The Department has included 
all regulatory familiarization costs in Year 1. We believe firms will 
need to familiarize themselves with the rule in Year 1 in order to 
identify whether any contracts will be covered in Year 1. It is 
possible a contractor will postpone the familiarization effort until it 
is poised to have a covered contract (i.e., a new contract within one 
of the 4 covered categories). However, since many contractors will have 
at least one new contract in Year 1, and the Department has no data on 
when contractors will first be affected, the Department has included 
all regulatory familiarization costs in Year 1.

                                                                  Table 9--Year 1 Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Initial            Initial
                                                               Regulatory       implementation     implementation       Recurring          Recurring
                         Variable                           familiarization       costs  (no      costs  (current     implementation     administrative
                                                                 costs         current policy)        policy)             costs              costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hours per potentially affected contractor................                  2                 10                  1                N/A                N/A
Hours per employee.......................................                N/A                N/A                N/A                  1               0.33
Potentially affected contractors \a\.....................            489,419             92,990            396,430                N/A                N/A
Newly affected employees.................................                N/A                N/A                N/A            222,059                N/A
Total affected employees.................................                N/A                N/A                N/A                N/A            222,059
Loaded wage rate.........................................             $82.17             $27.50             $27.50             $27.50             $27.50
    Base wage b..........................................             $56.29             $18.84             $18.84             $18.84             $18.84
    Benefits adj. factor c...............................               1.46               1.46               1.46               1.46               1.46
Cost ($1,000s)...........................................            $80,427            $25,573            $10,902             $6,107             $2,036
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Total number of prime contractors from the GSA's SAM from August 2015 and subcontractors from USASpending.gov. Number of entities operating under
  covered contracts on Federal property from various sources. Total is split between firms with and without a sick leave policy based on results from a
  SHRM survey.
\b\ Regulatory familiarization uses OES mean wage for human resource managers in 2015. Available at: http://www.bls.gov/oes/current/oes113121.htm. Other
  costs use OES mean wage for human resources assistants, except payroll and timekeeping in 2015. Available at: http://www.bls.gov/oes/current/oes434161.htm.
\c\ Ratio of loaded wage to unloaded wage from the 2015 ECEC.

2. Implementation Costs
    Firms will incur implementation costs. The Department believes some 
of these costs will be incurred in Year 1 and will occur regardless of 
the number of employees affected but other implementation costs will be 
incurred as employees become covered and be a function of the number of 
affected employees. Therefore, the Department modeled this in two 
parts. First, firms will incur upfront implementation costs (e.g., 
fixed time costs associated with making baseline adjustments to 
accounting and payroll software that are not dependent on the size of 
the firm). Second, because we believe overall implementation costs will 
generally vary with the size of the firm, we have included a cost per 
affected employee. Because this Final Rule will only apply to employees 
on new contracts, the Department estimates it will take approximately 
five years to phase in the coverage over nearly all affected employees. 
Therefore, recurring implementation costs will generally be spread over 
the first five years that the regulation is in effect, with some fixed 
costs upfront. As each contract becomes affected, the covered 
contractors will need to spend some time updating the accounting 
systems used to track paid sick leave and training managers responsible 
for implementing the requirements of the Executive Order and this rule.
    Fixed costs that do not vary by number of employees are assumed to 
be a small share of total implementation costs but they provide an 
opportunity to vary costs across firms with and without sick leave 
programs in place. The Department assumed firms that need to create a 
sick leave policy will each spend 10 hours of time developing this 
policy, regardless of the number of employees, and firms with a program 
in place will spend one hour, regardless of the number of 
employees.\56\ According to a survey conducted by the Society for Human 
Resource Management (SHRM), 81 percent of companies provided some form 
of paid sick leave.\57\ As noted above, the Department estimated there 
are 489,400 Federal contracting firms. Therefore, the Department 
estimated 93,000 firms will need to create a sick leave policy (19 
percent of 489,400 firms). The remaining 396,400 firms would have lower 
implementation costs. The share of firms with a system in place is 
consistent with findings from one study of the San Francisco paid sick 
leave ordinance that found ``only one-sixth needed to introduce an 
entirely new paid sick days policy because of the law.'' \58\ This is 
16.7 percent, which is comparable to the SHRM estimate (19 percent) the 
Department used above.
---------------------------------------------------------------------------

    \56\ When developing the NPRM the Department identified little 
applicable data from which to estimate the amount of time required 
to make these adjustments. One source, based on a small sample, 
finds the average one-time implementation costs ranged from zero to 
$125,000 with an average of 0.125 percent of revenue. See Romich, 
J., et al. (2014). Implementation and Early Outcomes of the City of 
Seattle Paid Sick and Safe Time Ordinance. However, the authors 
note: ``These respondents are self-selected and too few to provide 
statistically representative data. However, their responses offer a 
qualitative sense of the range of possible costs.''
    \57\ Society for Human Resource Management. (2008). Examining 
Paid Leave in the Workplace: Helping Your Organization Attract and 
Retain Talented Employees. SHRM reports are available based on more 
recent surveys, which indicate a greater proportion of firms have a 
paid sick leave program than the 81 percent figure used here. 
However, the newer estimates seem inconsistent with data from other 
sources concerning the prevalence of paid sick leave programs; 
because of this uncertainty, and to avoid a possible underestimate 
of implementation costs, the Department has relied here on the 
earlier SHRM report.
    \58\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick 
Leave Ordinance: Outcomes for Employees and Employers. Institute for 
Women's Policy Research.
---------------------------------------------------------------------------

    In addition to these fixed costs, all firms with affected employees 
will have additional implementation costs that vary based on the number 
of affected employees. The Department also assumed, as it did in the 
NPRM, that firms will spend one hour on implementation costs per newly 
affected employee. Total implementation costs are therefore a function 
of whether the firm has a system in place and the number of affected 
employees.

[[Page 67685]]

    For this Final Rule, the Department has included a table 
demonstrating average implementation hours by contractor size. For a 
contractor with a current paid sick leave policy and 50 affected 
employees, we estimated they will spend 51 hours over five years 
implementing the program. We estimated that a contractor without a 
current paid sick leave policy and 50 affected employees will spend a 
total of 60 hours over five years implementing the program. Contractors 
with no affected employees are estimated to accrue just the fixed 
implementation costs. This includes covered contractors whose paid sick 
leave policies already provide for at least one hour of paid sick leave 
per 30 hours worked; contracting firms strictly providing materials and 
supplies to the government; and other firms registered in SAM with no 
Federal contracts covered by the Executive Order. This is an 
overestimate of the number of firms incurring fixed implementation 
costs; contracting firms only providing materials and supplies will 
incur no fixed implementation costs because they have no employees 
working on covered contracts and will not have to make any changes to 
their current systems. Thus, while some firms may spend more than one 
hour (or 10 hours depending on whether they currently have a system in 
place), other firms will spend less time; one hour (or 10 hours for a 
firm with no system) is used to approximate the average time spent for 
all of the potentially affected contracting firms.

                          Table 10--Implementation Hours by Employer Size Over 5 Years
----------------------------------------------------------------------------------------------------------------
                                                                 Per firm hours for implementation over 5 years
                 Number of affected employees                  -------------------------------------------------
                                                                   No current policy          Current policy
----------------------------------------------------------------------------------------------------------------
1-5...........................................................                    11-15                      2-6
6-10..........................................................                    16-20                     7-11
11-20.........................................................                    21-30                    12-21
21-50.........................................................                    31-60                    22-51
51-100........................................................                   61-110                   52-101
101-500.......................................................                  111-510                  102-501
501-1,000.....................................................                511-1,010                502-1,001
1,001-2,000...................................................              1,011-2,010              1,002-2,001
----------------------------------------------------------------------------------------------------------------

    The Department values this time using human resources worker's mean 
wage of $27.50 per hour.\59\ Initial implementation costs in Year 1 
were estimated to be $36.5 million ($27.50 per hour x 10 hours x 93,000 
contractors plus $27.50 per hour x 1 hour x 396,400 contractors) (Table 
9). The Department assumes recurring implementation costs will use one 
hour of a human resource worker's time per newly affected employee. As 
stated above, the Department found that the average wage with benefits 
for a human resources worker is $27.50 per hour. The estimated number 
of newly affected employees in Year 1 is 222,100 (Table 9). Therefore, 
total Year 1 recurring implementation costs were estimated to equal 
$6.1 million ($27.50 x 1 hour x 222,100 employees). The Chamber/IFA 
asserted that implementation will require the time of multiple 
employees at various levels within a company and thus a blended wage 
rate should be used. However, the Department believes a human resources 
worker is capable of performing the tasks necessary for a contractor to 
implement the Order and this part, and the Chamber provided no specific 
basis for computing a blended wage rate.
---------------------------------------------------------------------------

    \59\ This includes the mean base wage of $18.84 from the OES 
plus benefits paid at a rate of 46 percent of the base wage, as 
estimated from the BLS's ECEC data. OES data available at: http://www.bls.gov/oes/current/oes113121.htm.
---------------------------------------------------------------------------

    The Chamber/IFA contended that affected employees were 
underestimated in the NPRM (as mentioned previously) and that this may 
cause costs to be underestimated. It expressed concern that the 
Department's ``estimate is based only on consideration of numbers of 
employees who may currently lack access to 7 days of paid leave, and it 
ignores the impact on thousands more employees and their employers 
because current programs offering 7 or more days of leave fail to match 
other prescriptive details of the proposed rule.'' The Department's 
estimate of implementation costs in this Final Rule includes an hour of 
implementation time for contractors that currently offer 7 or more days 
of sick leave, i.e., the initial implementation cost. The Department 
believes the costs associated with changing a paid sick leave policy 
solely to meet the prescriptive details of the Order and implementing 
regulations will be minimal, particularly because some contractors 
likely provide an opportunity to take 7 or more days of paid sick leave 
in programs for which leave is already permitted for any reason, and 
that its one-hour estimate is accordingly appropriate.
    As noted earlier, the Chamber/IFA also believes affected employees 
may be underestimated because the analysis assumes workers are working 
only on Federal contracts. This modeling method was retained in the 
Final Rule because the number of truly affected employees is unknown. 
The number of employees sharing work on Federal contracts will impact 
recurring costs; therefore the Department tried to take into account 
that this work may be spread over several employees when it estimated 
the amount of time per affected employee--i.e. per affected full-year-
on-federal-contract equivalents--necessary for implementation and 
administrative activities. If this has not been adequately reflected in 
the time cost estimates, and the costs used instead better represent 
costs per one worker working exclusively on Federal contracts, then the 
total costs may be underestimated. Unfortunately, data are not 
available to determine whether this is true and if so, how much higher 
costs may be.
    Various commenters, including AGC, the Chamber/IFA, TrueBlue, Inc., 
the American Benefits Council, PSC and Integrated Facility Services, 
also expressed a general concern that the Department's time estimates 
were low. For example, TrueBlue, Inc. asserted the time estimates are 
inaccurate because ``[m]aking the necessary procedural, IT 
infrastructure, and administrative changes needed to accommodate and 
comply with the proposed rules is complicated, daunting, time-
consuming, and leaves any employer open to making potentially costly 
mistakes.'' Additionally, the Chamber/IFA expressed a concern that the 
Department's estimate of the time allotted for implementation is 
insufficient for the amount of training required in a company to 
implement

[[Page 67686]]

this regulation. However, the Department believes that the total hours 
estimated for implementation by companies, as demonstrated in Table 10 
above, adequately covers any training, IT, and administrative time that 
might be necessary to implement any changes. Indeed, other commenters 
provided evidence from state and municipality laws that supports the 
Department's assessment concerning the size of implementation costs. 
For example, many commenters submitted a form letter that cites 
research finding that 70 percent of employers in the city of Seattle 
had experienced no administrative difficulties with implementation.\60\ 
Another report found that in Connecticut almost half of employers 
reported that the new state law had caused no change in their overall 
costs.61 62 Evidence from state and local laws is discussed 
in additional detail in the section on ``Other Potential Costs.''
---------------------------------------------------------------------------

    \60\ Romich, Romich, J., Bignell, W., Brazg, T., Johnson, C., 
Mar, C., Morton, J., & Song, C. (2014). Implementation and Early 
Outcomes of the City of Seattle Paid Sick and Safe Time Ordinance. 
University of Washington Publication. Available at http://www.seattle.gov/Documents/Departments/CityAuditor/auditreports/PSSTOUWReportwAppendices.pdf.
    \61\ Appelbaum, E., et al. (2014). Good for Business? 
Connecticut's Paid Sick Leave Law. Center for Economic and Policy 
Research and The Murphy Institute at the City University of New York 
Publication. Available at: http://cepr.net/documents/good-for-business-2014-02-21.pdf.
    \62\ However, it should be noted that the Connecticut law may be 
easier to implement since it applies to all workers at a firm. 
Therefore, it does not necessitate tracking hours on different 
contracts.
---------------------------------------------------------------------------

    The Department has carefully reviewed the comments suggesting its 
implementation costs estimate in the NPRM was too low as well as the 
comments suggesting that the Department's estimate in the NPRM was 
appropriate. For the reasons described above, the Department has not 
adjusted the implementation time estimates for this Final Rule.
3. Recurring Administrative Costs
    Contractors may incur recurring administrative costs associated 
with maintaining records of paid sick leave, approving leave, and 
adjusting scheduling. In the NPRM the Department assumed an HR worker 
will spend on average an additional fifteen minutes per affected 
employee annually on administrative costs. We believe these costs will 
be relatively small because employers already have systems in place and 
already incur many of these costs for employees who take sick leave. 
For example, managers may need to adjust scheduling when workers take 
time off due to illness regardless of whether that sick leave is paid 
or unpaid. These costs should therefore reflect only the costs 
associated with the marginal number of days of leave taken due to the 
implementation of this Final Rule. The additional number of days of 
leave taken is unknown but estimates tend to be in the 1-to-2 day 
range. For example, Ahn and Yelowitz (2016) found that paid sick leave 
results in workers staying home 1.2 more days a year.63 64
---------------------------------------------------------------------------

    \63\ Ahn, T. and Yelowitz, A. (2016). Paid Sick Leave and 
Absenteeism: The First Evidence from the U.S. Available at: http://ssrn.com/abstract=2740366.
    \64\ Using the ATUS 2011 Leave Module, the Department estimated 
workers with paid sick leave take on average an additional 2.3 hours 
of sick leave compared to workers with no paid sick leave annually. 
Using the National Health Interview Survey (NHIS) the Department 
found workers with paid sick leave took on average 0.77 more days of 
sick leave than did workers without paid sick leave.
---------------------------------------------------------------------------

    Many commenters, including the Chamber/IFA, PSC, American Outdoors 
Association and the National Roofing Contractors Association asserted 
the rule would be administratively burdensome and/or that the proposed 
cost is too low. For example, the Chamber/IFA believes the 15-minute 
estimate is too low because it does not include time for workers to 
enter their hours, and the National Roofing Contractors Association 
asserts that its members are concerned the paid sick leave mandate will 
disrupt their daily operations.
    Other commenters discussed the high cost of tracking hours worked 
on Federal contracts. For example, SBA Advocacy contended construction 
industry representatives have represented that segregating covered 
federal work from non-federal work for the accrual of paid sick leave 
will be challenging because their employees often work at multiple 
locations for multiple clients. However, the Department believes that 
for billing and/or other purposes most businesses already track hours 
spent on work for different clients on different contracts. For 
example, hours worked by laborers and mechanics on DBA contracts must 
already be monitored and reported. SBA Advocacy believes this may be a 
concern for seasonal recreation businesses which it asserts ``often 
have large numbers of part time workers and operate in remote 
locations, shifting from covered and non-covered work for multiple 
days.''
    Conversely, some commenters provided evidence from state and 
municipality laws demonstrating that administrative costs will be low. 
For example, many commenters cited a study of Connecticut's paid sick 
leave law that found employers ``typically found that the 
administrative burden was minimal.'' 65 66 The study authors 
wrote: ``In our fieldwork, some managers noted that it took time and 
effort to establish mechanisms to track employee hours for those 
receiving paid sick day coverage for the first time. However, once 
those mechanisms were in place, the staff required to administer the 
law was modest.'' Evidence from state and local laws is discussed in 
additional detail in the section on ``Other Potential Costs.'' 
Additionally, some commenters drew upon their own experience as 
evidence that providing paid sick leave is not overly burdensome to 
implement. Hawthorne Auto Clinic has 33 years of experience providing 
sick leave to employees and wrote ``[b]ased on our experience, I am 
confident that other businesses will find it simple to implement paid 
sick days policies.''
---------------------------------------------------------------------------

    \65\ Appelbaum, E., et al. (2014). Good for Business? 
Connecticut's Paid Sick Leave Law. Center for Economic and Policy 
Research and The Murphy Institute at the City University of New York 
Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
    \66\ However, it should be noted that the Connecticut law may be 
easier to implement since it applies to all workers at a firm. 
Therefore, it does not necessitate tracking hours on different 
contracts.
---------------------------------------------------------------------------

    The Department believes most employers already track employees' 
time and thus these costs would be negligible. The Department has also 
reduced both the frequency with which contractors must calculate 
covered employees' accrued paid sick leave, and the frequency with 
which contractors must inform covered employees of the paid sick leave 
they have accrued, as explained in the discussion of subpart A above. 
Therefore, the recurring administrative costs of this Final Rule will 
be lower than the proposed rule. However, despite that, the Department 
agrees with commenters that these administrative costs may be 
underestimated and has increased the time estimate from 15 minutes per 
affected employee to 20 minutes in order to be responsive to comments. 
The Department would like to emphasize this is the average amount of 
time per affected employee. Some employees may require more time; for 
example, employees whose requests are denied might require more 
administrative effort. However, many employees do not take any sick 
leave and their costs would be negligible. Based on tabulations of the 
2014 National Health Interview Survey (NHIS) data, the Department 
estimated that 46.9 percent

[[Page 67687]]

of workers with paid sick leave do not take any sick leave in a 
year.\67\
---------------------------------------------------------------------------

    \67\ However, due to the additional uses allowed under this 
rulemaking and the provisions to prevent retaliation, use may be 
expanded due to this Final Rule.
---------------------------------------------------------------------------

    The cost of this time is estimated as the mean wage for a human 
resource worker of $27.50 per hour.\68\ The Department estimates in 
Year 1 there will be 222,100 affected employees. Under these 
assumptions, administrative costs in Year 1 will total $2.0 million 
($27.50 x (20 minutes/60 minutes) x 222,100 employees). Although these 
costs are relatively small in Year 1, they will occur annually and thus 
be a significant share of costs in the long run.
---------------------------------------------------------------------------

    \68\ This includes the mean base wage of $18.84 from the 2015 
OES plus benefits paid at a rate of 46 percent of the base wage, as 
estimated from the BLS's ECEC data. OES data available at: http://www.bls.gov/oes/current/oes113121.htm.
---------------------------------------------------------------------------

    Some commenters, including the Chamber/IFA, argued this wage is 
inappropriate. However, the Chamber did not provide any evidence for 
what a more appropriate wage rate would be. Additionally, as noted 
earlier, the Chamber/IFA believes affected employees may be 
underestimated because we assume employees are working exclusively on 
Federal contracts. As noted in the section on implementation costs, 
because the number of truly affected employees is unknown, the 
Department considered costs related to the equivalent of one employee 
working exclusively on Federal contracts.
4. Projected Costs
    Table 11 shows estimated costs for each of the first 10 years as 
well as average annualized costs over the same period. Regulatory 
familiarization and initial implementation costs will only accrue in 
Year 1. Recurring implementation costs are incurred over the first 5 
years since the Department has estimated it will take five years for 
the universe of covered contracts to become ``new.'' Recurring 
administrative costs accrue in all years. The annual administrative 
cost increases until Year 5 because the number of affected employees 
increases during this period. After Year 5, recurring administrative 
costs level off, with only a small increase over time to reflect 
employment growth.
    When estimating projected costs the Department employed the same 
method used for Year 1 but used projected numbers of affected 
employees. The employment growth rate was calculated as the geometric 
annual growth rate based on the ten-year employment projection for 2014 
to 2024 from BLS' Employment Projections program. Real wages for human 
resource managers and human resources assistants (except payroll and 
timekeeping) were assumed to remain constant over this ten-year period.

                              Table 11--Direct Employer Costs in Years 1 Through 10
                                               [Millions of 2015$]
----------------------------------------------------------------------------------------------------------------
                                                      Initial        Recurring       Recurring
       Year/discount rate           Regulatory    implementation  implementation  administrative       Total
                                   famil. costs        costs         costs \a\         costs
----------------------------------------------------------------------------------------------------------------
                                               Years 1 through 10
----------------------------------------------------------------------------------------------------------------
Year 1..........................           $80.4           $36.5            $6.1            $2.0          $125.0
Year 2..........................             0.0             0.0             6.4             4.2            10.5
Year 3..........................             0.0             0.0             6.4             6.3            12.7
Year 4..........................             0.0             0.0             6.4             8.4            14.8
Year 5..........................             0.0             0.0             6.4            10.5            16.9
Year 6..........................             0.0             0.0             0.0            10.6            10.6
Year 7..........................             0.0             0.0             0.0            10.7            10.7
Year 8..........................             0.0             0.0             0.0            10.8            10.8
Year 9..........................             0.0             0.0             0.0            10.9            10.9
Year 10.........................             0.0             0.0             0.0            11.0            11.0
----------------------------------------------------------------------------------------------------------------
                                           Average Annualized Amounts
----------------------------------------------------------------------------------------------------------------
3% discount rate................             9.2             4.2             3.4             8.3            25.0
7% discount rate................            10.7             4.9             3.7             8.0            27.3
----------------------------------------------------------------------------------------------------------------
\a\ Recurring implementation costs are incurred for the first 5 years as since the Department has estimated it
  will take five years for the universe of possibly covered contracts to become ``new.''

5. Other Potential Costs
    In addition to the costs discussed above, there may be additional 
costs that have not been quantified. These include the following 
potential costs included in the NPRM: Costs to consumers, reduced 
production, and replacement costs. Based on similar rules in states and 
municipalities, the Department expects these costs to be small.\69\ 
After discussing these costs we then discuss additional costs mentioned 
by commenters, including: Costs to seasonal businesses, reduced 
profits, reduced benefits, bonuses, or wages, reduced employment, 
absenteeism, and competitive disadvantage.
---------------------------------------------------------------------------

    \69\ See: http://www.dol.gov/featured/PaidLeave/get-the-facts-sicktime.pdf.
---------------------------------------------------------------------------

Consumer Costs
    The relevant consumer is the Federal government. If the rulemaking 
increases employers' costs, and contractors pass along part or all of 
the increased cost to the government, in the form of higher contract 
prices, then government expenditures may rise (though, as discussed 
later, benefits of the Executive Order are expected to accompany any 
such increase in expenditures). Because direct costs to employers and 
transfers are relatively small compared to Federal covered contract 
expenditures, the Department believes that any potential increase in 
contract prices will be negligible. In FY2015, Federal expenditures for 
covered contracting service firms were $286.4 billion (Table 3). 
Employer costs and transfers (estimated below) in Year 5 (the year when 
all employees are affected) are estimated to be $473.6 million. 
Therefore, employer costs are 0.17

[[Page 67688]]

percent of contracting revenue (assuming no growth in contracting 
expenditures and without accounting for the benefits of the Final 
Rule).
    Concerning prices, the National Roofing Contractors Association 
wrote that paid sick leave costs ``must be factored into the bids 
submitted for any federal contract and will add further to the already 
high degree of uncertainty to the bidding process.'' MCAA believes 
firms will ``have to add high price contingencies to their bids or 
proposals to cover these new contingent risks.'' However, a study of 
Connecticut's paid sick leave law, cited by many commenters, found only 
15.5 percent of employers reported increased prices.\70\ Similarly, in 
San Francisco 10.9 percent of firms raised prices in response to paid 
sick leave.\71\ Therefore, there is some evidence that increased costs 
will be passed on to the government in higher contract prices. However, 
the Department expects this price increase to be low because evidence 
shows a minority of firms raised prices and the cost of the rulemaking 
is a very small share of these firms' revenues.
---------------------------------------------------------------------------

    \70\ Appelbaum, E., et al. (2014). Good for Business? 
Connecticut's Paid Sick Leave Law. Center for Economic and Policy 
Research and The Murphy Institute at the City University of New York 
Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
    \71\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick 
Leave Ordinance: Outcomes for Employers and Employees. Institute for 
Women's Policy Research.
---------------------------------------------------------------------------

    Some commenters believe this rulemaking will reduce the efficiency 
of government contracting by increasing government contract prices or 
stifling competition. Roffman Horvitz PLC wrote ``[t]he proposed 
regulation creates additional overhead contract costs that new 
government contractors simply cannot bear to absorb, creating further 
barriers to entry in the market.'' The National Roofing Contractors 
Association spoke with members who reported ``they would consider not 
bidding at all on federal contracts'' due to this rulemaking. 
Conversely, the Washington Center for Equitable Growth cited research 
evaluating Washington, DC's Accrued Sick and Safe Leave Act of 2008 
that found that ``[i]n 2013, the Office of the District of Columbia 
Auditor looked at the effects of the requirement and found no evidence 
that businesses opted to leave Washington or that it prevented new 
business formation in the District.'' 72 73 In order for 
competition to be stifled, costs would have to increase (and outweigh 
benefits) and not be passed along to the government. As noted above, we 
believe costs will be small on average and will be accompanied by 
benefits, and some costs will be passed along to the government, 
leaving little reason to restrain the vast majority of bidders.
---------------------------------------------------------------------------

    \72\ Branche, Y. (2013). Audit of the Accrued Sick and Safe 
Leave Act of 2008. Washington, DC: Office of the District of 
Colombia Auditor. Available at: http://dcauditor.org/sites/default/files/DCA092013.pdf.
    \73\ Impacts of this rule may differ from DC because this law 
may result in employers having to distinguish between covered and 
non-covered workers. Additionally, the DC law required less paid 
sick leave, one hour for every 37 to 87 hours, depending on the size 
of the firm.
---------------------------------------------------------------------------

Production Costs
    If the number of days of sick leave taken remains unchanged by the 
Final Rule, then production should not be affected by the rule. 
However, employees may take more sick days if the number of compensated 
sick days available increases or the scope of eligible reasons to take 
sick leave broadens; it is via this path that the Final Rule might 
result in production costs to employers. There is evidence that workers 
may take additional days of leave under this rulemaking.\74\
---------------------------------------------------------------------------

    \74\ Data suggest that workers may take more sick leave when it 
is paid. Using the ATUS 2011 Leave Module, the Department estimated 
workers with paid sick leave take on average an additional 2.3 hours 
of sick leave annually. Using the NHIS the Department found workers 
with paid sick leave took on average 0.77 more days of sick leave. 
Workers who already have paid sick leave may also expand their usage 
because of the additional uses allowed under this rulemaking and the 
provisions to prevent retaliation.
---------------------------------------------------------------------------

    If these additional hours are not covered by a replacement worker, 
then the employer incurs costs associated with this lost production and 
the employee receives benefits associated with the paid sick leave 
(expressed as a transfer from employer to employee in this rule). 
Payroll remains the same but the worker's production is lost. If a 
worker's productivity is equal to his or her wage, then the cost is 
equivalent to income paid to the worker in wages while on sick leave.
    If employers bring in workers to cover these lost hours of 
production, then the additional cost (i.e., the replacement worker's 
wages) is offset because the employer does not lose the production 
attributed to the sick worker. In both cases, the employer incurs net 
costs equivalent to one worker's wage or productivity; either the 
employer pays the sick worker, but loses the sick worker's 
productivity, or the employer pays both the sick worker and the 
replacement worker, but does not lose the sick worker's productivity. 
In both cases, costs and benefits should offset each other, to the 
extent that workers are paid according to their marginal productivity, 
and the productivity of the replacement worker matches that of the 
original worker. Although these assumptions are not likely to be 
exactly met, conceptually small deviations from the assumptions should 
result in only small deviations of net costs or benefits. In addition, 
there are no data available on which to estimate these net costs or 
benefits.
Replacement Costs
    As demonstrated above, if the worker who takes sick leave is 
temporarily replaced by another worker, the marginal payroll cost of 
the additional worker is offset by the productivity of the replacement 
worker. Therefore, the Department estimates there will be very few 
additional costs associated with bringing in workers to cover work 
normally performed by workers on sick leave (in addition to the cost of 
paying the sick worker). However, there are four channels through which 
additional costs may be incurred if firms bring in replacement workers. 
These all stem from the assumption that workers take more leave when 
paid sick leave is provided. These costs will depend on whether firms 
hire new workers or reschedule current workers.
    First, there are managerial costs associated with rescheduling; 
these are included in administrative costs. Second, if replacement 
workers are hired, then there may be associated hiring costs. The 
Department expects this cost to be small. A 2010 survey of employers 
providing paid sick days in San Francisco found 8.4 percent reported 
``always'' or ``frequently'' hiring a replacement for a sick worker and 
23.6 percent saying they ``rarely'' hire replacement workers.\75\ 
Third, if other workers are scheduled at their overtime wage rate, then 
there may be some additional cost associated with the overtime premium. 
Once again, the Department expects this cost to be small. Many 
commenters cited a study of Connecticut's paid sick leave law that 
found 13.7 percent of employers had other workers work overtime to 
cover absences as the primary method of covering absences.\76\ Fourth, 
if the replacement worker is paid the same amount as the absent worker 
but is less productive, then there may be some production costs.
---------------------------------------------------------------------------

    \75\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick 
Leave Ordinance: Outcomes for Employers and Employees. Institute for 
Women's Policy Research.
    \76\ Appelbaum, E., et al. (2014). Good for Business? 
Connecticut's Paid Sick Leave Law. Center for Economic and Policy 
Research and The Murphy Institute at the City University of New York 
Publication. Page 11. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
---------------------------------------------------------------------------

    Some commenters disagreed with the Department's analysis in the 
previous

[[Page 67689]]

paragraph as it was depicted in the NPRM. For example, the National 
Roofing Contractors Association asserted that the Department's 
assumption means that a replacement worker would have to do the job of 
two people for this rationale to make sense. This was not an assumption 
made by the Department. The point of the discussion in the NPRM and 
above is that if an employer pays another worker to replace the sick 
worker, that employer does not incur any costs in addition to the 
transfers accounted for elsewhere in the Regulatory Impact Analysis 
section.
Reduced Profits
    Some commenters argued profits will be hurt. However, after the 
Seattle law took effect a majority of employers reported profitability 
was unchanged.\77\ The Institute for Women's Policy Research cited the 
2011 IWPR report on San Francisco's Paid Sick Leave Ordinance, which 
found that ``Six of seven employers reported no negative effect on 
profitability after the law's implementation.'' \78\ In part, this may 
be because costs were passed through to consumers or wages or other 
benefits to workers were reduced. However, the same survey found that 
only 10.9 percent of firms raised prices (as discussed above) and 
``[s]ix out of seven workers reported that their employer did not 
reduce raises, bonuses, or other benefits to implement'' (benefits, 
bonuses, and wages are discussed below).\79\ Therefore, it seems 
employers make adjustments through multiple channels to account for any 
increased costs.
---------------------------------------------------------------------------

    \77\ Romich, J., et al. (2014). Implementation and Early 
Outcomes of the City of Seattle Paid Sick and Safe Time Ordinance. 
University of Washington. Available at: http://www.seattle.gov/Documents/Departments/CityAuditor/auditreports/PSSTOUWReportwAppendices.pdf.
    \78\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick 
Leave Ordinance: Outcomes for Employers and Employees. Institute for 
Women's Policy Research.
    \79\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick 
Leave Ordinance: Outcomes for Employers and Employees. Institute for 
Women's Policy Research.
---------------------------------------------------------------------------

Reduction in Benefits, Bonuses, and Wages
    Some commenters believe this benefit would be offset by reductions 
in other benefits, bonuses, or pay. A commenter from New Jersey wrote 
that requiring paid sick leave will ``force them to look at 
alternatives to reduce other costs--reduce vacation eligibility or 
other types of benefits OR reducing staff or hours worked.'' We believe 
these impacts will be negligible. A study of Connecticut's paid sick 
leave law found only one percent of establishments reduced wages within 
the time period of the analysis.\80\ And as noted in the survey 
discussed above, according to workers, employers generally did not 
reduce benefits, raises, or bonuses as a result of the San Francisco 
Ordinance.
---------------------------------------------------------------------------

    \80\ Appelbaum, E., et al. (2014). Good for Business? 
Connecticut's Paid Sick Leave Law. Center for Economic and Policy 
Research and The Murphy Institute at the City University of New York 
Publication. Page 13. Available at: http://cepr.net/documents/good-for-buisness-2014-&-02-21.pdf.
---------------------------------------------------------------------------

Reduction in Employment
    Some commenters believe this benefit will hurt employment or hours. 
One small business owner believes this rule will cause lay-offs. A 
manager of a seasonal recreational business believes the increased 
costs will result in employment cuts, in particular for youth. The 
Department believes any impact on employment will be small due to case 
studies of paid sick leave and the small size of costs relative to 
these contractors' payroll and revenue. For example, a study of 
Connecticut's paid sick leave law found that approximately 90 percent 
of employers did not reduce employee hours.\81\ Furthermore, in 
Seattle, job growth was stronger in 2013 after the Ordinance went into 
effect than it was in the first part of 2012. The Department does, 
however, account for some decreased hours in the model in the DWL 
calculation (section V.C.iv.).\82\
---------------------------------------------------------------------------

    \81\ Appelbaum, E., et al. (2014). Good for Business? 
Connecticut's Paid Sick Leave Law. Center for Economic and Policy 
Research and The Murphy Institute at the City University of New York 
Publication. Page 13. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
    \82\ Main Street Alliance of Washington. (2013). Paid Sick Days 
and the Seattle Economy: Job Growth and Business Formation at the 1-
year Anniversary of Seattle's Paid Sick and Safe Leave Law. 
Available at: http://www.seattle.gov/Documents/Departments/CivilRights/psst-report-main_street_alliance.pdf.
---------------------------------------------------------------------------

Work Absences
    Some commenters expressed concern that the rulemaking will increase 
workers' absences. This is especially a concern to employers when the 
absences are considered abuse of the policy. AGC asserted its member 
contractors working in Massachusetts have noticed questionable uses of 
paid sick leave since the state adopted a paid leave mandate. They also 
cited research by Ahn and Yelowitz (2016) \83\ showing that paid sick 
leave increases absenteeism by 1.2 days a year.\84\ They also noted 
that absenteeism in the construction industry causes unique challenges 
because cost and schedule concerns are highly dependent on labor 
productivity. This issue is discussed in more detail in section 
V.C.vii.
---------------------------------------------------------------------------

    \83\ Ahn, T. and Yelowitz, A. (2016). Paid Sick Leave and 
Absenteeism: The First Evidence from the U.S. Available at: http://ssrn.com/abstract=2740366.
    \84\ The authors measure ``absenteeism'' as the amount of sick 
leave taken from one's job, regardless of the reason. The Department 
chose to not use this result to calculate quantitative estimates of 
impacts for various reasons, including that the estimate is based on 
administrative workers and thus may not be applicable to all 
workers.
---------------------------------------------------------------------------

    The Department agrees the rulemaking will likely increase days away 
from the office because workers may stay home more often when sick or 
to care for sick family members. This is an intended result of the 
rulemaking, and the Department expects the benefits from increased 
access to paid sick leave to partially offset increased costs. 
Moreover, there is little evidence of employees abusing paid sick 
leave.
    According to a study of Connecticut's paid sick leave law, managers 
commented that ``the level of abuse was not only low, but [had] not 
changed at all after the state law's implementation.'' \85\ The 
Department also believes abuse is uncommon because most workers with 
paid sick leave do not take all of their paid sick days and a 
significant portion of workers do not take any paid sick leave.\86\
---------------------------------------------------------------------------

    \85\ Appelbaum, E., et al. (2014). Good for Business? 
Connecticut's Paid Sick Leave Law. Center for Economic and Policy 
Research and The Murphy Institute at the City University of New York 
Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
    \86\ Based on tabulations of the 2014 NHIS, the Department 
estimated that 46.9 percent of workers with paid sick leave do not 
take any sick leave in a year.
---------------------------------------------------------------------------

Competitive Disadvantage
    According to the American Benefits Council:

    Providing mandatory paid leave will increase costs of doing 
business, but the requirements--and increased costs--apply only to 
those businesses providing services to the federal government. A 
business operating in a federal building must provide the paid 
leave; its competitor down the street need not. This puts the 
business in the federal building at a financial disadvantage. It 
cannot simply request that the government pay for the increased 
costs. In these types of contracts, the contractor remits a portion 
of its proceeds to the government. The federal building business can 
increase its prices (although some contracts with the government 
limit the business's ability to do so) and hope that the price 
increase does not drive customers away. The federal building 
business can cut costs in other ways--decreasing staffing levels or 
reducing service options. Or, the federal building business can 
decide to cease operating in a federal building.


[[Page 67690]]


The Department reiterates that the costs of this Final Rule are 
expected to be small relative to payroll and revenue. Therefore, even 
if the contractor incurs additional costs they should be incorporated 
by small adjustments to prices, profits, wages, or hours (as discussed 
above). Additionally, because the Final Rule only applies to new 
contracts, the bidder can potentially restructure its contractual 
relationship in order to be able to incur the potentially higher costs 
without making these adjustments. The Department believes contractors 
will find the most efficient combination of adjustments.
    The Chamber/IFA considered competitive disadvantage from a 
different angle: ``The proposed rule may raise costs for contractors 
who need to create new or modify existing paid sick leave programs and 
put them at a contract bidding disadvantage compared to firms that 
already have such plans in place.'' However, it is the contractor who 
may presently avoid the costs of providing sick leave to employees that 
has a competitive advantage; requiring contractors to provide paid sick 
leave removes that advantage. Indeed, as the U.S. Women's Chamber of 
Commerce commented: ``Requiring more businesses to provide paid sick 
leave will help level the playing field for those business owners who 
are doing the right thing for their workers.''
    DLA Piper asked whether the Department considered the impact of the 
proposed rule on commercial item contractors and barriers to 
participation. As an initial matter, the Department recognizes that 
some commercial items contracts may be covered by the Executive Order 
and part 13 because they cover contracts covered by the SCA, which may 
apply in certain circumstances to contracts for commercial services. 
See, e.g., 48 CFR 52.212-5(c). However, a significant portion of 
commercial items contracts will not be covered by the Order and part 
13. First, the paid sick leave requirements do not apply to commercial 
supply contracts subject to the Walsh-Healey Public Contracts Act. 
Second, unless covered under one of the other contract categories in 
the Order (such as concession contracts), the Final Rule will not apply 
to contracts for services that are specifically exempted from coverage 
under the SCA, including those commercial services listed in 29 CFR 
4.123(e). For the reasons discussed above, the Department's conclusions 
regarding the benefits and costs associated with other contractors 
implementing the Order are similarly applicable to any commercial items 
contracts subject to the Order and this Final Rule.
iii. Transfer Payments
1. Calculating Transfer Payments
    To calculate transfer payments, the Department has assumed solely 
for purposes of discussion and ease of presentation that no offsetting 
cost- and productivity-related benefits will be realized as a result of 
the Executive Order and this Final Rule. As discussed in section 
V.C.v., however, numerous benefits of providing paid sick leave under 
the Executive Order can be expected to accompany the transfer payments 
and other costs discussed above.
    The most important factor in determining transfer payments is the 
number of additional days of paid sick leave for which employees will 
be compensated. In order to estimate transfer payments the Department 
needed to:
     Assign a monetary value to these days of paid sick leave 
taken; and
     Determine what share of the additional 968,000 days of 
paid sick leave accrued (calculated above in section V.B.iv.) will be 
taken.
    The Final Rule requires contractors to provide an employee the same 
pay and benefits for hours of paid sick leave used that the employee 
would have received had he been working. Thus, the Department needed to 
estimate both a base hourly wage for affected employees and a base 
hourly benefit rate. The Department assumed an 8-hour work day to place 
a monetary value on the transfer payment associated with a day of paid 
sick leave used. The Department used data from the 2015 CPS to estimate 
base hourly wage rates by industry and full-time status. The SCA 
nationwide fringe benefit rate, which applies to most contracts covered 
by the SCA, currently is $4.27 per hour. Because many of the contracts 
covered by the Executive Order will be subject to the SCA, and many 
employees performing on or in connection with contracts covered by the 
Executive Order but not covered by the SCA will nonetheless be 
performing service-related work similar in character to work performed 
by SCA-covered service employees, the Department estimated that most 
affected employees will average a base hourly benefit rate of $4.27. 
The exception is the construction industry, for which the Department 
used the benefits to wage ratio from the ECEC for the construction 
industry (1.45) because employees in the construction industry will be 
performing on or in connection with DBA contracts rather than SCA 
contracts.\87\
---------------------------------------------------------------------------

    \87\ For full-time construction workers benefits are estimated 
to be $10.06 per hour (45 percent of $22.47). For part-time 
construction workers benefits are estimated to be $7.94 per hour (45 
percent of $17.74).
---------------------------------------------------------------------------

    Although the Executive Order will allow employees to accrue up to 
56 hours of paid sick leave annually, many employees will not use all 
paid sick leave that they accrue (and many others will not work a 
sufficient number of hours on covered contracts to accrue 56 hours of 
paid sick leave in an accrual year). If employees take less than the 
full amount of paid sick leave accrued, then transfer payments should 
include only some of the additional days accrued. The Department 
expects employees on average to use fewer days than allocated. To 
estimate the share of accrued days employees will use, the Department 
used data from the 2015 NCS and ECEC by industry (provided by the BLS 
and reported in Table 12). While the numbers vary by industry, over all 
industries employees with paid sick leave take an average of 4 days of 
sick leave annually.\88\ Employees with access to a fixed number of 
paid sick leave days per year accrued an average of 8 days annually. 
Dividing the average days of paid sick leave taken by the average days 
of paid sick leave accrued annually, the Department estimated that 
employees use on average 50 percent of days allotted. This may be an 
overestimate in Year 1 when employees may have fewer days available 
since they will not start to accrue paid sick leave until they commence 
work on a covered contract, nor will they carry over any days from the 
previous year.\89\ This could also be an underestimate because the 
additional uses allowed under this rulemaking and the provisions to 
prevent retaliation, may result in expanded use for employees who 
already have paid sick leave.
---------------------------------------------------------------------------

    \88\ BLS calculated this using the ECEC data based on workers in 
paid sick leave plans where a cost was incurred by the employer in 
the reference period.
    \89\ This assumes employees with sick leave in the NCS are 
allowed to carry over sick days. The larger the share of these 
employees without carryover privileges, the more appropriate the 
number is for Year 1 and the less appropriate it is for future 
years.
---------------------------------------------------------------------------

    Case studies demonstrate that not all paid sick days will be taken. 
In a comment by the Institute for Women's Policy Research, the 
organization cited the 2011 IWPR report on San Francisco's Paid Sick 
Leave Ordinance that found that the average worker used only three paid 
sick days per year and 25 percent used no paid sick days at all.\90\
---------------------------------------------------------------------------

    \90\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick 
Leave Ordinance: Outcomes for Employers and Employees. Institute for 
Women's Policy Research.

[[Page 67691]]



                         Table 12--Ratio of Days of Sick Leave Available That Are Taken
----------------------------------------------------------------------------------------------------------------
                                    Average number of days \a\                     Total additional days of paid
                                 --------------------------------  Ratio of days            sick leave
            Industry                                                 available   -------------------------------
                                     Available         Taken           taken         Available         Taken
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing    ..............  ..............            0.50             349             174
 \b\............................
Mining..........................              27               2            0.07             162              12
Utilities.......................              21               6            0.29           1,823             521
Construction....................               6               2            0.33         111,849          37,283
Manufacturing...................               8               3            0.38          29,961          11,235
Wholesale trade.................               8               3            0.38             526             197
Retail trade....................               6               2            0.33          70,740          23,580
Transportation and warehousing..               9               4            0.44          70,509          31,337
Information.....................               9               4            0.44           7,231           3,214
Finance and insurance...........              12               5            0.42           9,130           3,804
Real estate and rental and                     6               4            0.67             376             251
 leasing........................
Professional, scientific, and...               8               4            0.50         254,562         127,281
Management of companies and.....              12               4            0.33               0               0
Administrative and waste                       8               2            0.25         263,752          65,938
 services.......................
Educational services............              11               5            0.45          10,488           4,767
Health care and social                         8               4            0.50          79,304          39,652
 assistance.....................
Arts, entertainment, and                       6               3            0.50           9,231           4,616
 recreation.....................
Accommodation and food services.               6               2            0.33          39,016          13,005
Other services..................               8               3            0.38           9,007           3,378
                                 -------------------------------------------------------------------------------
    Total private \c\...........               8               4            0.50         968,017         370,246
----------------------------------------------------------------------------------------------------------------
\a\ For this Final Rule the BLS provided this breakdown using NCS and ECEC data for industries with sufficient
  observations to meet their publication criteria.
\b\ NCS does not include information for this industry. Used average across all private employees.
\c\ Total additional days of paid sick leave taken is not equal to the number of paid sick leave days available
  multiplied by the share of 50 percent. This is because the analysis was conducted at the industry level and
  days were aggregated to estimate the total. Due to rounding by the BLS of the number of days, the aggregated
  total number of days taken and the total using aggregated number of days available and taken differ.

    Therefore, of the 968,000 days of additional paid sick leave 
accrued, 370,200 days are estimated to be taken and result in transfer 
payments (see Table 12). Using wage data by industry results in Year 1 
transfer payments of $85.5 million (Table 13). This is 0.03 percent of 
revenue from Federal contracts for these contractors (since many 
covered contractors garner revenue from private work, the transfer 
payment estimate is almost certainly a lower percentage of their total 
revenues). If all days of paid sick leave were used, transfers would be 
$214.4 million in Year 1 or 0.07 percent of Federal contracting 
revenues.

                                      Table 13--Transfer Payments in Year 1
----------------------------------------------------------------------------------------------------------------
                                                                                                    Transfer as
                                                                                      Covered        share of
                    Industry                           NAICS         Transfer       contracting     contracting
                                                                     ($1,000s)        revenue         revenue
                                                                                  (millions) \a\     (percent)
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and..............              11             $28            $339            0.01
Mining..........................................              21               3             105            0.00
Utilities.......................................              22             142           3,043            0.00
Construction....................................              23           9,565          24,194            0.04
Manufacturing...................................           31-33           2,558          20,703            0.01
Wholesale trade.................................              42              44             254            0.02
Retail trade....................................           44-45           3,869           1,263            0.31
Transportation and warehousing..................           48-49           6,501          11,005            0.06
Information.....................................              51             793           8,146            0.01
Finance and insurance...........................              52             981          18,734            0.01
Real estate and rental and leasing..............              53              55           1,174            0.00
Professional, scientific, and...................              54          36,531         136,870            0.03
Management of companies and.....................              55               0               0            0.01
Administrative and waste services...............              56          11,660          29,781            0.04
Educational services............................              61           1,040           4,290            0.02
Health care and social assistance...............              62           8,438          22,845            0.04
Arts, entertainment, and recreation.............              71             816             103            0.79
Accommodation and food services.................              72           1,870           1,161            0.16
Other services..................................              81             615           2,387            0.03
                                                 ---------------------------------------------------------------

[[Page 67692]]

 
    Total private...............................  ..............          85,508         286,396            0.03
----------------------------------------------------------------------------------------------------------------
\a\ Source: USASpending.gov. Contracting expenditures for covered contracts.

    To estimate transfers beyond year 1, the Department projected 
employment and wage growth. The employment growth rate was calculated 
as the geometric annual growth rate based on the ten-year employment 
projection for 2014 to 2024 from BLS' (as discussed in section 
V.B.iv.). The Department calculated the average annual geometric growth 
rate in median nominal wages from CPS data between 2005 and 2015. The 
geometric growth rate is the constant annual growth rate that when 
compounded yields the last historical year's wage. The CPI-U was then 
used to convert this nominal growth rate to a real growth rate.
    The real growth rate for benefit payments was calculated using the 
geometric growth rate in nominal SCA benefit rates between 2006 and 
2015 and converted to a real rate using the CPI-U.\91\ For projected 
transfers the Department employed the same method used for Year 1 but 
used the projected number of employees and wages. Table 14 shows 
projected transfers through Year 10. It also contains average 
annualized transfers using both 3 percent and 7 percent discount rates.
---------------------------------------------------------------------------

    \91\ The Department calculated how estimates would change if we 
used the GDP deflator instead of the CPI-U to adjust wages and 
benefits. The differences are small. Average annualized transfers 
would increase by 0.89% from $349.6 million to $352.7 (costs would 
not change).
---------------------------------------------------------------------------

    If some contracts last longer than 5 years, then not all contracts 
will be covered by Year 5 and transfers will accrue more slowly. In 
general, the Department believes most contracts will renew within five 
years but notes that some contracts, such as contracts for concessions 
and operations on federal lands may last longer than five years.

                Table 14--Transfers in Years 1 Through 10
------------------------------------------------------------------------
                                                             Transfers
                   Year/discount rate                      (millions of
                                                              2015$)
------------------------------------------------------------------------
                           Years 1 through 10
------------------------------------------------------------------------
Year 1..................................................           $85.5
Year 2..................................................           176.2
Year 3..................................................           268.3
Year 4..................................................           361.8
Year 5..................................................           456.7
Year 6..................................................           464.4
Year 7..................................................           472.2
Year 8..................................................           480.2
Year 9..................................................           488.4
Year 10.................................................           496.8
------------------------------------------------------------------------
                       Average Annualized Amounts
------------------------------------------------------------------------
3% discount rate........................................           364.1
7% discount rate........................................           349.6
------------------------------------------------------------------------

2. Additional Considerations
    The Department based its method of calculating transfers on the 
number of employees working exclusively on Federal contracts. To the 
extent that Federal contract work is split between employees, these 
transfer estimates may be over- or underestimates. The current method 
attributes all hours worked on a Federal contract to one employee. For 
example, if that employee currently receives five paid sick leave days 
per year, he or she would receive a transfer of two additional days of 
paid sick leave. If instead half this work was completed by one 
employee and half by another employee, the Executive Order would 
require that each receive 3.5 sick days per year; however, since each 
employee already receives 5 days of paid sick leave, there would be no 
incremental transfer. The Department estimated that the maximum size of 
the overestimate due to the assumption of employees working exclusively 
on Federal contracts is $27.0 million in Year 1 (31.6 percent of the 
$85.5 million in total transfers).\92\ Conversely, if this work is 
spread across multiple employees, and these employees currently do not 
receive any paid sick leave, and the propensity to take the paid sick 
leave diminishes with the number of days, then this methodology could 
result in an underestimate of transfers.
---------------------------------------------------------------------------

    \92\ The maximum possible overestimate was calculated by 
eliminating transfers associated with employees who currently 
receive any paid sick leave.
---------------------------------------------------------------------------

    Another consideration is that some of the transfers may be reduced 
by employer responses to the rule. Employers may reduce vacation time, 
reduce wages, or increase health insurance premiums in order to 
diminish some of their increased costs. (These outcomes may be unlikely 
in the short run due to stickiness of compensation.) Employers may also 
reallocate days of leave to keep total benefits the same. For example, 
an employer that used to provide 5 sick days and 5 vacation days could 
now provide 5 sick days, 3 vacation days, and 2 days that can be used 
for any purpose. This would leave exactly zero employer-employee 
transfer because an employee could take 7 days paid sick leave if 
necessary but could still only take a maximum of 5 days of vacation. 
(Provided the policy met the requirements of section 2 of the Order and 
this Final Rule and employees could use accrued paid sick leave and the 
2 ``any-purpose'' days for the same purposes and under the same 
conditions as described in the Order and this Final Rule, the employer 
would be in compliance and transfers would be zero).
    Some commenters expressed concern that because monitoring hours 
worked on Federal contracts will be very burdensome employers may 
provide paid sick leave to all workers for all hours worked in order to 
reduce the monitoring costs. For example, the ERISA Industry Committee 
asserted that many large employers are likely to apply the Executive 
Order's requirements to a larger group than what is mandated by the 
Executive Order to reduce the risk of excluding covered employees. 
However, benefits potentially provided to workers on non-covered 
contracts are not quantified.
    Transfer payments were calculated assuming paid sick leave is 
accrued for all 52 weeks of the year. If workers take paid sick leave 
or other leave, and do not accrue hours while on leave, then transfers 
may be slightly lower. The impact for full-time employees will be 
negligible. An employee who works 40

[[Page 67693]]

hours per week will reach the 56 hour cap after 42 weeks of work. 
Therefore, they will reach the cap regardless of whether paid sick 
leave is accrued while on leave. For part-time employees, hours of 
accrual are slightly overestimated. For example, an employee who works 
25 hours per week will accrue 43.3 hours of paid sick leave annually 
(assuming no leave). If this worker takes a week of sick leave, and 
paid sick leave is not accrued during this week, then they will accrue 
0.8 fewer hours of paid sick leave (25/30). If this worker also took 
two weeks of vacation, they would accrue 1.7 fewer hours of paid sick 
leave ((25 x 2)/30).
iv. Deadweight Loss
    Deadweight loss (DWL) occurs when a market operates at less than 
optimal equilibrium output. This typically results from an intervention 
that sets, in the case of a labor market, compensation above the 
equilibrium level.\93\ The higher cost of labor leads to a decrease in 
the total number of labor hours that are purchased on the market. DWL 
is a function of the difference between the compensation the employers 
were willing to pay for the hours lost and the compensation employees 
were willing to take for those hours. In other words, DWL represents 
the total loss in economic surplus resulting from a ``wedge'' between 
the employer's willingness to pay and the employee's willingness to 
accept work arising from the Final Rule. DWL may vary in magnitude 
depending on market parameters, but it is typically small when wage 
changes are small or when labor supply and labor demand are relatively 
inelastic with respect to compensation.
---------------------------------------------------------------------------

    \93\ The estimate of DWL assumes the market meets the 
theoretical conditions for an efficient market in the absence of 
this intervention (e.g., all conditions of a perfectly competitive 
market hold: Full information, no barriers to entry, etc.). Since 
labor markets are generally not perfectly competitive, this estimate 
is necessarily imprecise.
---------------------------------------------------------------------------

    The DWL resulting from this Final Rule was estimated based on the 
average decrease in hours worked and increase in average hourly 
compensation (again, without accounting for offsetting benefits of the 
Executive Order and the Final Rule). As the cost of labor rises due to 
the requirement to pay sick leave, the quantity of labor demanded 
decreases, which results in fewer hours worked. To calculate the DWL, 
the annual increase in compensation (i.e., transfers per worker) was 
divided by the total number of hours worked to estimate the average 
hourly increase in compensation.\94\ Using the estimated percent change 
in compensation and the elasticity of labor demand with respect to wage 
(as a proxy for compensation), the Department estimated the percent 
decrease in average hours per employee.\95\ To estimate the percent 
decrease in average hourly wages associated with labor supply, the 
Department used the decrease in average hours per employee and the 
elasticity of labor supply with respect to wage (again, as a proxy for 
compensation).\96\
---------------------------------------------------------------------------

    \94\ For the purposes of the DWL calculation, we treat the 
increase in employee benefits resulting from the paid leave 
requirement as if it were equivalent to an increase in employees' 
hourly wage. This is necessary because the parameters needed to 
evaluate the DWL (i.e., the wage elasticities) are expressed 
strictly in terms of wages. However, to the extent that employers 
may replace (``crowd out'') some of their employees' wages with the 
required paid sick benefit, this will result in an overestimate of 
DWL. (It may also change the nature of the DWL in ways not captured 
by this numerical analysis.)
    \95\ An elasticity of -0.2 was used based on the Department's 
analysis of Lichter, A., Peichl, A., and Siegloch, A. (2014). The 
Own-Wage Elasticity of Labor Demand: A Meta-Regression Analysis. IZA 
DP No. 7958.
    \96\ An elasticity of 0.15 was used based on a literature review 
and specifically results from Bargain, O., Orsini, K., and Peichl, 
A. (2011). Labor Supply Elasticities in Europe and the US. IZA DP 
No. 5820.
---------------------------------------------------------------------------

    Using these values the Department calculated DWL per affected 
employee (Table 15). This was multiplied by the number of affected 
employees to estimate total DWL; $182,900 in Year 1. Projected DWL is 
shown in Table 16. Average annualized DWL during the first ten years 
the rule is in effect is estimated to be $734,500.

                                                          Table 15--Deadweight Loss Calculation
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Percent change in wage
                                                    Average          from base \a\         Average      Percent      DWL per
                    Industry                      base hourly --------------------------    annual     change in     affected     Affected    Total DWL
                                                      wage      Change in    Change in    hours per      hours       employee    employees
                                                                 Ld wage      Ls wage      employee
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ag., forestry, fish. and hunting................       $15.96         1.48        -1.98        2,182        -0.30        $1.79           58         $104
Mining..........................................        28.79         0.12        -0.16        2,473        -0.02         0.02           39            1
Utilities.......................................        29.67         0.75        -1.00        2,172        -0.15         0.84          294          247
Construction....................................        22.06         1.01        -1.35        2,126        -0.20         1.12       20,280       22,728
Manufacturing...................................        24.16         0.78        -1.04        2,157        -0.16         0.74        6,372        4,718
Wholesale trade.................................        23.59         0.67        -0.89        2,151        -0.13         0.53          133           71
Retail trade....................................        16.14         0.82        -1.10        1,804        -0.16         0.46       16,709        7,690
Transportation and warehousing..................        21.56         0.90        -1.20        2,165        -0.18         0.89       15,609       13,826
Information.....................................        27.13         0.61        -0.82        1,971        -0.12         0.47        2,587        1,218
Finance and insurance...........................        28.10         0.69        -0.93        2,083        -0.14         0.66        2,484        1,636
Real estate and rental and leasing..............        23.17         1.38        -1.85        1,949        -0.28         2.02           95          192
Prof., sci., and tech. services.................        31.73         0.83        -1.11        2,044        -0.17         1.05       72,713       76,026
Management of companies.........................        27.40         0.47        -0.62        2,104        -0.09         0.29            0            0
Administrative and waste services...............        17.67         0.68        -0.91        1,957        -0.14         0.37       50,648       18,913
Educational services............................        22.78         1.26        -1.68        1,601        -0.25         1.36        2,456        3,329
Health care and social assistance...............        22.33         1.10        -1.47        1,877        -0.22         1.19       19,587       23,260
Arts, entertainment, and recreation.............        17.40         1.33        -1.77        1,680        -0.27         1.21        2,184        2,634
Accommodation and food services.................        13.52         1.08        -1.44        1,721        -0.22         0.63        7,718        4,889
Other services..................................        18.33         0.95        -1.26        1,803        -0.19         0.69        2,092        1,451
                                                 -------------------------------------------------------------------------------------------------------
    Total private...............................  ...........  ...........  ...........  ...........  ...........  ...........      222,059      182,934
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ This is the change in the wage rate associated with the labor supply (Ls) or labor demand (Ld) curve and the new level of hours.


[[Page 67694]]


                   Table 16--DWL in Years 1 Through 10
------------------------------------------------------------------------
                                                           DWL (millions
                   Year/discount rate                        of 2015$)
------------------------------------------------------------------------
                           Years 1 through 10
------------------------------------------------------------------------
Year 1..................................................           $0.18
Year 2..................................................            0.38
Year 3..................................................            0.57
Year 4..................................................            0.77
Year 5..................................................            0.96
Year 6..................................................            0.98
Year 7..................................................            0.99
Year 8..................................................            1.00
Year 9..................................................            1.01
Year 10.................................................            1.03
------------------------------------------------------------------------
                       Average Annualized Amounts
------------------------------------------------------------------------
3% discount rate........................................            0.76
7% discount rate........................................            0.73
------------------------------------------------------------------------

v. Benefits
    There are a variety of benefits associated with this rule; however, 
due to data limitations these are not monetized. The following benefits 
were discussed qualitatively in the NPRM: Improved employee health, 
improved health of dependents, increased productivity, reduced hiring 
costs, decreased healthcare expenditures, improved firm profits and 
decreased government expenditures relative to what would be expected if 
the rule's costs and transfer impacts were considered in isolation, and 
job growth. The first part of this section considers these benefits and 
related comments. The second part of this section considers benefits 
discussed by commenters that were not included in the benefits section 
of the NPRM RIA.
1. Benefits Discussed Qualitatively in the NPRM
Improved Employee Health
    Multiple studies have shown that paid sick leave greatly reduces 
the chance of employee injury and/or exposure to illness. When sick 
employees attend their jobs, they engage in a practice known as 
``presenteeism.'' Presenteeism is detrimental to productivity, and 
increases the probability of workplace injury and illness, resulting in 
greater employer and employee costs. In one study from the American 
Journal of Public Health, which many commenters cited, researchers used 
data from multiple industries (construction, retail, manufacturing, 
health care, etc.) to show that employees with access to paid sick 
leave were 28 percent less likely to incur a non-fatal work injury than 
their counterparts without paid sick leave.\97\
---------------------------------------------------------------------------

    \97\ Asfaw, A, Pana-Cryan, R., and Rosa, R. (2012). Paid Sick 
Leave and Nonfatal Occupational Injuries. American Journal of Public 
Health, 102(9), e59-e64.
---------------------------------------------------------------------------

    In a similar study, data from the outbreak of the 2009 H1N1 
pandemic showed that individuals who were not paid for absences had a 
4.4 percentage point greater change of contracting an influenza-type 
illness than those with sick leave pay (9.2 percent versus 13.6 
percent; only the rate for workers without paid leave is statistically 
significant at the 10 percent level).\98\ A study of Connecticut's paid 
sick leave law, cited by many commenters, found 18.8 percent of 
employers reported reduced presenteeism and 14.8 percent reported a 
reduction in spread of illness.\99\
---------------------------------------------------------------------------

    \98\ Kumar, S., Quinn, S.C., Kim, K.H., Daniel, L.H., and 
Freimuth, V.S. (2011) The Impact of Workplace Policies and Other 
Social Factors on Self-Reported Influenza-like Illness Incidence 
During the 2009 H1N1 Pandemic. American Journal of Public Health, 
102(1), 134-140.
    \99\ Appelbaum, E., et al. (2014). Good for Business? 
Connecticut's Paid Sick Leave Law. Center for Economic and Policy 
Research and The Murphy Institute at the City University of New York 
Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
---------------------------------------------------------------------------

    Diminishing presenteeism by providing paid sick leave can be 
expected to have positive impacts on employee health, as it would 
reduce the possibility that sick employees could potentially expose 
their colleagues to infection or disease. Studies have linked the 
incidence of presenteeism to a lack of paid sick leave. For instance, a 
2010 survey found that 37 percent of the working respondents who had 
paid sick leave, had attended work with a contagious illness.\100\ 
Meanwhile, 55 percent of employees with no paid sick leave had attended 
work with a contagious illness.\101\
---------------------------------------------------------------------------

    \100\ Smith, T.W. and Kim, J. (2010). Paid Sick Days: Attitude 
and Experiences. Public Welfare Foundation.
    \101\ These proportions are suggestive of a difference between 
employees with and without paid sick leave, but no standard errors 
or sample sizes were provided to determine if these are 
statistically significantly different proportions.
---------------------------------------------------------------------------

    Many commenters discussed the health benefits of paid leave. In 
particular, commenters stressed the reduction in the spreading of 
contagious illnesses. The Iowa Main Street Alliance wrote: ``Our 
businesses know that when employees stay home rather than reporting to 
work sick, their co-workers and customers stay healthy. Preventing the 
spread of illness in the workplace saves money.'' Many form letter 
submissions cited studies demonstrating how paid sick leave reduces the 
prevalence of presenteeism and prevents spreading illnesses. The first 
is a national survey that found ``87 percent of employers reported that 
employees had come to work with short-term, easily spread illnesses 
such as a cold or the flu.'' \102\ The second reported that ``people 
without paid sick time are 1.5 times more likely than people with paid 
sick time to go to work with a contagious illness like the flu.'' \103\ 
The third examined Google flu data from 2003 to 2015 and found ``that 
when workers gained access to paid sick days, the number of workers 
going to work with contagious illnesses decreased, causing infection 
rates to decrease by up to 20 percent.'' \104\
---------------------------------------------------------------------------

    \102\ Wolters Kluwer Law & Business. (2008). On the Job, But Out 
of It? CCH Survey Looks At Ill Effects of Sick Employees At Work. 
Available at: http://www.cch.com/press/news/2008/20080110h.asp.
    \103\ Smith, T.W. and Kim, J. (2010). Paid Sick Days: Attitudes 
and Experiences. National Opinion Research Center at the University 
of Chicago Publication.
    \104\ Pichler, S., and Ziebarth, N.R. (2015). The Pros and Cons 
of Sick Pay Schemes: Testing for Contagious Presenteeism and 
Shirking Behavior. Deutsches Institut f[uuml]r Wirtschaftsforschung 
Publication. Available at: http://www.diw.de/documents/publikationen/73/diw_01.c.514633.de/dp1509.pdf.
---------------------------------------------------------------------------

    Contagious illnesses in industries where employees interact with 
the public may be especially problematic. One commenter in particular 
mentioned the Chipotle Mexican Grill case.\105\ According to NELP, 
``[t]he poultry industry receives hundreds of millions of dollars in 
federal contracts . . . The lack of paid sick leave [in the industry], 
and the widespread use of putative sick leave policies, often means 
workers are required to choose between their health and their 
employment. This has serious implications not only for workers, but may 
also impact the safety of our food.'' \106\ NELP and the Nebraska 
Appleseed Center for Law in the Public Interest cited a survey that 
found 62 percent of workers reported they have gone to work while sick. 
When asked why they had gone to work sick, 77 percent responded they 
did not have paid sick leave and needed the money.\107\
---------------------------------------------------------------------------

    \105\ The commenter did not elaborate but for context, this 
refers to sick employees attending work which led to two norovirus 
outbreaks. For more information see: http://www.cnbc.com/2016/02/08/chipotle-blames-norovirus-outbreaks-on-sick-employees.html.
    \106\ However, the Department notes that poultry industry 
contracts with the Federal government may not be covered by this 
rulemaking because it does not cover contracts for commercial items 
subject to the Walsh-Healey Public Contracts Act.
    \107\ Northwest Arkansas Workers' Justice Center. (2016). Wages 
and Working Conditions in Arkansas Poultry Plants. Available at: 
http://nwawjc.org/poultry-report/.

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[[Page 67695]]

Improved Health of Dependents
    Another potential positive impact of the Final Rule is its indirect 
effect on the health of an employee's dependents (particularly 
children). Paid leave has a substantial impact on parents' ability to 
care for sick children. One study, using the Baltimore Parenthood Study 
and multivariate analysis, found parents with paid sick leave or 
vacation leave were 5.2 times more likely to remain home to care for 
their sick child.\108\ According to a study in San Francisco by the 
Institute for Women's Policy Research, parents that did not have paid 
sick leave were more than 20 percentage points more likely to send 
their children to school while sick (75.9 compared with 53.8).\109\ 
This ``child presenteeism'' is problematic because these pupils have 
the potential to expose other students and teachers to the illness, 
decreasing others' health.
---------------------------------------------------------------------------

    \108\ Heymann, S.J., Toomey, S., and Furstenberg, F. (1999) 
Working Parents: What Factors are involved in Their Ability to Take 
Time off from Work When Their Children Are Sick? Archives of 
Pediatrics and Adolescent Medicine, 153(8): 870-874.
    \109\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick 
Leave Ordinance: Outcomes for Employees and Employers. Institute for 
Women's Policy Research.
---------------------------------------------------------------------------

    Commenters agreed. Legal Aid Society wrote: ``Parents' access to 
paid sick days can positively impact their children's health and 
academic success . . . Parents without access to paid sick days are 71% 
more likely to send an ill child to school or child-care than those 
parents with access to paid sick days.'' \110\ Legal Aid Society also 
pointed out that: ``Sick children can have a significant effect on 
spreading contagious illness. A study analyzing the spread of pandemic 
influenza found that children and teenagers make up nearly 65% of those 
responsible for infectious flu contacts.'' \111\ They also cited 
research demonstrating that children recover better from illnesses and 
injuries when their parents care for them.\112\
---------------------------------------------------------------------------

    \110\ Kim, J. and Smith, T.W. (2010). Paid Sick Days: Attitudes 
and Experiences, National Opinion Research Center At The University 
Of Chicago. Available at: http://news.uchicago.edu/static/newsengine/pdf/100621.paid.sick.leave.pdf.
    \111\ Beyeler, W.E., Glass, L.M., and Glass, R.J. (2005). 
National Infrastructure Simulation and Analysis Center, Sandia 
National Laboratories, Local Mitigation Strategies for Pandemic 
Influenza. Available at: http://www.sandia.gov/CasosEngineering/docs/FluMitigationPaperWithFullSOMTables.pdf.
    \112\ Chung, P.J. and Schuster, M.A. (2014). Time Off to Care 
for a Sick Child--Why Family-Leave Policies Matter. New England 
Journal of Medicine, 37(493). Earle, A. and Heymann, J. (2010). 
Raising The Global Floor: Dismantling The Myth That We Can't Afford 
Good Working Conditions For Everyone.
---------------------------------------------------------------------------

    The ability to take sick leave to care for individuals equivalent 
to a family relationship may be especially helpful in the LGBT 
community. The Williams Institute at the UCLA School of Law noted the 
rule ``would also allow employees to use paid sick leave to care for a 
partner's children, even when the employee has no legally recognized 
relationship to the children. This policy is particularly important for 
LGBT people, who continue to experience unique barriers to establishing 
parental status or legal custody of a partner's children.''
Increased Productivity
    As noted earlier, the Department expects the costs of providing 
paid sick leave under the Executive Order will be accompanied by its 
benefits. The Department particularly anticipates that contractor costs 
to provide paid leave will be accompanied by increased employee 
productivity. This increased productivity will occur through numerous 
channels, such as improved health, employee retention, and level of 
effort. When workers attend work while sick they tend to have 
diminished productivity. Goetzel et al. (2004) found that on-the-job 
productivity loss due to sickness represented 18 percent to 60 percent 
of employer costs associated with 10 health conditions.\113\
---------------------------------------------------------------------------

    \113\ Goetzel, R.Z., et al. (2004). Health, Absence, Disability, 
and Presenteeism Cost Estimates of Certain Physical and Mental 
Health Conditions Affecting U.S. Employers. JOEM, 46(4), 398-412.
---------------------------------------------------------------------------

    A strand of economic research, commonly referred to as ``efficiency 
wage'' theory, considers how an increase in compensation may be met 
with greater productivity.\114\ To the degree that the Final Rule 
increases employee compensation it could yield some of the benefits 
associated with efficiency wages.\115\ Efficiency wages may reduce 
employer costs by reducing turnover, allowing workers to gain more 
firm-specific human capital that enhances their productivity and 
reducing the cost of replacing workers. Efficiency wages may also 
elicit greater effort on the part of workers, making them more 
effective on the job.\116\ A higher wage implies a larger cost of 
losing one's job; employees will put in more effort in order to reduce 
the risk of losing the job. This is commonly referred to as the 
shirking model.\117\ Third, efficiency wages may attract higher-quality 
applicants.
---------------------------------------------------------------------------

    \114\ Akerlof, G.A. (1982). Labor Contracts as Partial Gift 
Exchange. The Quarterly Journal of Economics, 97(4), 543-569.
    \115\ As we note elsewhere in this analysis, increased 
compensation is not guaranteed for all affected workers because some 
employers may respond to the paid sick leave requirement by reducing 
other fringe benefits, such as paid vacation, or by decreasing base 
wages.
    \116\ Another model of efficiency wages, which is less 
applicable here, is the adverse selection model in which higher 
wages raise the quality of the pool of applicants.
    \117\ Shapiro, C. and Stiglitz, J.E. (1984). Equilibrium 
Unemployment as a Worker Discipline Device. The American Economic 
Review, 74(3), 433-444.
---------------------------------------------------------------------------

    Providing paid sick leave to employees has been associated with 
decreased job separations. In one 2013 study, the author showed that 
paid sick leave is associated with a decrease in the probability of job 
separation of 25 percent.\118\ Such a reduction in job separation would 
increase marginal productivity because new employees have less firm-
specific capital (i.e., skills and knowledge that have productive value 
in their particular company) and thus would require additional 
supervision and training to match the productivity of former 
workers.\119\ Other research supports the hypothesis that paid leave 
encourages employees to remain at their respective companies. In a 
survey of two hundred human resource managers, two-thirds cited family-
supportive policies as the single most important factor in attracting 
and retaining employees.\120\ By providing paid sick leave, companies 
may be able to reduce the firm's turnover rate and increase 
productivity (and therefore reduce hiring costs, see the section on 
reduced hiring costs below).
---------------------------------------------------------------------------

    \118\ Hill, H. (2013). Paid Sick Leave and Job Stability. Work 
and Occupations, 40(2), 10.
    \119\ Argote, L., Insko, C.A., Yovetich, N., and Romero, A.A. 
(1995). Group Learning Curves: The Effects of Turnover and Task 
Complexity on Group Performance. Journal of Applied Social 
Psychology, 25(6), 512-529.
    Shaw, J.D. (2011). Turnover Rates and Organizational 
Performance: Review, Critique, and Research Agenda. Organizational 
Psychology Review, 1(3), 187-213.
    Dube, A., Lester, T.W., and Reich, M. (2013). Minimum Wage 
Shocks, Employment Flows and Labor Market Frictions. IRLE Working 
Paper #149-13.
    \120\ Williams, J. (2001). Unbending Gender: Why Work and Family 
Conflict and What to Do About It. Oxford University Press.
---------------------------------------------------------------------------

    Commenters agreed that the rule will increase productivity. Many 
form letter submissions cited studies demonstrating how paid sick leave 
improves productivity. The first uses results from the American 
Productivity Audit to estimate that presenteeism cost the economy 
$206.6 billion in 2005 (after adjusting for inflation).\121\ The second 
is

[[Page 67696]]

a survey of human resources executives that found ``38 percent reported 
presenteeism being a problem in their organizations, and 69 percent 
reported having paid sick time or other paid time off policies in place 
as measures to prevent this problem.'' \122\ The third is a survey 
showing that ``26 percent of workers without paid time off to see a 
doctor reported having six or more days in which they were unable to 
concentrate at work, compared to 17 percent of workers who had such 
paid time off.'' \123\ The fourth demonstrates that paid sick days 
``help workers recover and return to work more quickly: Nationally, 
workers without paid sick days spent more days bedridden due to illness 
than workers with paid sick days.'' \124\ The last showed that in 
Jersey City, ``businesses that changed their policies to comply with 
the law reported significant benefits, including a reduction in the 
number of sick employees coming to work, [and] an increase in 
productivity.'' \125\
---------------------------------------------------------------------------

    \121\ Stewart, W.F., Ricci, J.A., Chee, E., and Morganstein, D. 
(2003). Lost Productive Work Time Costs from Health Conditions in 
the United States: Results From the American Productivity Audit. 
Journal of Occupational and Environmental Medicine, 45(12), 1234-
1246. (Unpublished calculation based on $226 billion annually in 
lost productivity, 71 percent due to presenteeism.)
    \122\ Wolters Kluwer Law & Business. (2008). On the Job, But Out 
of It? CCH Survey Looks At Ill Effects of Sick Employees At Work. 
Available at: http://www.cch.com/press/news/2008/20080110h.asp.
    \123\ Davis, K., Collins, S.R., Doty, M.M., Ho, A., and 
Holmgren, A.L. (2005). Issue Brief: Health and Productivity among 
U.S. Workers. The Commonwealth Fund Publication. The Department 
notes that this study does not provide information to determine 
whether the point estimate of 26 percent is statistically 
significantly higher than the 17 percentage point estimate.
    \124\ Human Impact Partners. (2009). A Health Impact Assessment 
of the Healthy Families Act of 2009. Available at: http://www.humanimpact.org/downloads/national-paid-sick-days-hia-report/.
    \125\ Lindemann, D. and Britton, D. (2015). Earned Sick Days in 
Jersey City: A Study of Employers and Employees at Year One. Center 
for Women and Work at Rutgers, the State University of New Jersey 
Publication. Available at: http://cww.rutgers.edu/sites/cww.rutgers.edu/files/documents/working_families/Jersey_City_ESD_Issue_Brief.pdf.
---------------------------------------------------------------------------

    Finally, productivity may increase due to the ability to attract 
more productive employees. Many commenters cited the same Jersey City 
study, which found that benefits to businesses that changed their 
policy to adhere to the city's paid sick leave law experienced ``an 
improvement in the quality of job applicants.''
Reduced Hiring Costs
    By providing paid sick leave, employers may experience lower job 
turnover, resulting in higher productivity and lower hiring costs, both 
of which would positively impact profits (the benefit of increased 
productivity was discussed above and profits are discussed below). 
Multiple studies demonstrate an inverse relationship between sick leave 
pay and employee turnover. One 2003 study from the University of 
Michigan found that when employers in upstate New York implemented a 
paid sick leave policy, they experienced modest reductions in employee 
turnover.\126\ Lowering employee turnover reduces hiring costs, 
boosting profitability. Various research shows that firms incur a 
substantial cost for hiring new employees. A review of 27 case studies 
found that the median cost of replacing an employee was 21 percent of 
the employee's annual salary.\127\ These costs might be diminished by 
incorporating paid sick leave into family friendly policies. Even 
though marginal labor costs may rise when employers provide paid sick 
leave, the Department expects the new, higher wages will be partially 
offset by increased productivity, and reduced hiring and training 
costs.
---------------------------------------------------------------------------

    \126\ Baughman, R., Holtz-Eakin, D. and DiNaridi, D. (2002). 
Productivity and Wage Effects of ``Family-Friendly'' Fringe 
Benefits. International Journal of Manpower, 24(3), 247-259.
    \127\ Boushey, H. and Glynn, S. (2012). There are Significant 
Business Costs to Replacing Employees. Center for American Progress. 
Available at: http://www.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf.
---------------------------------------------------------------------------

    The potential reduction in turnover is a function of several 
variables: The current wage, hours worked, turnover rate, industry, and 
occupation. Additionally, the estimated cost of replacing a separated 
employee, and providing paid sick leave to an employee, varies 
significantly based on factors such as industry and geographic 
region.\128\ Therefore, quantifying the potential benefits associated 
with a decrease in turnover attributed to this Final Rule would require 
many sources of data and assumptions.
---------------------------------------------------------------------------

    \128\ One 2008 study conducted by professors at San Francisco 
State University showed that in California providing sick leave to 
employees in the construction, retail, restaurant, and hotel 
industries could increase employer's payroll costs by between $299 
and $862 per employee annually. Potepan, M.J. (2008). Paid Sick 
Leave: Access, Costs and Feasibility of Implementation at the State 
Level. Sacramento State: Center for California Studies.
---------------------------------------------------------------------------

    Many commenters agreed that the rule will increase retention and 
diminish hiring costs. One commenter wrote: ``An employer is much more 
likely to lose their employee when a mother is forced to choose between 
a job and [her] child, or to have an employee who is struggling to 
balance the needs of work and childcare.'' The Main Street Alliance 
wrote: ``The costs of turnover can be high, and many business owners do 
not fully realize how providing paid sick time can reduce this cost. 
Employers who begin providing paid sick time often report that employee 
turnover is reduced, saving them the cost of hiring and training 
replacements, as well as that of lost productivity while the positions 
are unfilled.'' Many commenters submitting a form letter noted that in 
Jersey City, ``businesses that changed their policies to comply with 
the law reported significant benefits, including . . . a reduction in 
employee turnover.'' \129\ Many of these same commenters also cited 
research, noted above, that ``shows that an employee is at least 25 
percent less likely to voluntarily leave a job when the employee has 
access to paid sick days.'' \130\ A study of Connecticut's paid sick 
leave law, cited by many commenters, found 3.3 percent of employers 
reported reduced employee turnover.\131\ However, 10.6 percent reported 
increased loyalty which may result in additional long-term reductions 
in turnover.
---------------------------------------------------------------------------

    \129\ Lindemann, D. and Britton, D. (2015). Earned Sick Days in 
Jersey City: A Study of Employers and Employees at Year One. Center 
for Women and Work at Rutgers, the State University of New Jersey 
Publication. Available at: http://cww.rutgers.edu/sites/cww.rutgers.edu/files/documents/working_families/Jersey_City_ESD_Issue_Brief.pdf.
    \130\ Hill, H.D. (2013). Paid Sick Leave and Job Stability. Work 
and Occupations, 40(2), 143-173.
    \131\ Appelbaum, E., et al. (2014). Good for Business? 
Connecticut's Paid Sick Leave Law. Center for Economic and Policy 
Research and The Murphy Institute at the City University of New York 
Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
---------------------------------------------------------------------------

    Some commenters noted the high cost of turnover. The Main Street 
Alliance wrote: ``In middle- and low-wage jobs, turnover costs are 
estimated to be 16 to 20 percent of workers' annual wages.'' \132\ 
Commenters submitting a form letter noted, as we did above, that 
``[a]cross all occupations, median turnover costs are estimated to be 
21 percent of workers' annual wages.'' \133\ Additionally, one of the 
two authors of this study wrote in support of this rulemaking and 
confirmed the high cost of turnover.
---------------------------------------------------------------------------

    \132\ Ibid.
    \133\ Boushey, H. and Glynn, S.J. (2012). There Are Significant 
Business Costs to Replacing Employees. Center for American Progress 
Publication. Available at: http://www.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf.
---------------------------------------------------------------------------

Firm Profits/Earnings
    To the extent that productivity increases and turnover and hiring 
costs are reduced, offering paid sick leave will increase profits 
relative to what would be expected if the rule's costs and transfers 
were considered in isolation. Some studies have suggested there may be 
a positive relationship between paid sick leave and profits. In one 
such study from 2001, researchers discovered that having a paid sick 
leave policy had a positive effect on firms'

[[Page 67697]]

profits.\134\ The authors note, however, that efficiency wage theory 
underpins their empirical result and thus requires compensation to 
increase, which is not guaranteed to result from this rule because 
employers may respond to the paid sick leave requirement, where 
permitted by law, by reducing other fringe benefits, such as paid 
vacation, or by decreasing base wages. Additionally, even if 
compensation increases, efficiency wage theory may not apply if the 
main reason for the improved productivity is a response to the goodwill 
created by a voluntary increase in compensation offered by an 
employer.\135\ Therefore, it may not be valid to assume that Meyer et 
al.'s results would be comparable.\136\
---------------------------------------------------------------------------

    \134\ Meyer, C.S., Mukerjee, S., and Sestero, A. (2001). Work-
family Benefits: Which Ones Maximize Profits? Journal of Managerial 
Issues, 13(1), 28-44.
    \135\ Although efficiency wage literature tends to focus on 
firms voluntarily paying higher wages and thus distinguishing 
themselves from other firms, the literature provides no evidence 
that voluntarily paying higher wages is a necessary condition for 
efficiency wages. Efficiency wage theory may hold because employers 
paying higher wages attract more productive workers.
    \136\ Akerlof, G.A. (1982). Labor Contracts as Partial Gift 
Exchange. The Quarterly Journal of Economics, 97(4), 543-569.
---------------------------------------------------------------------------

    Few commenters discussed increased profits or earnings. The Legal 
Aid Society reported: ``A study published three years after [San 
Francisco's] ordinance's implementation found that over 70 percent of 
employers did not report any impact on profitability.'' \137\ 
Conversely, the HR Policy Association noted that ``the studies [cited 
in the NPRM] on productivity and firm profits are based on general 
efficiency wage theory and presented without a quantitative cost-
benefit analysis of the specific leave mandate for current and future 
beneficiaries of Executive Order 13706.'' The Department did not 
quantify the value of these benefits since none of the studies provided 
estimates that were directly applicable to employees covered by this 
Final Rule.
---------------------------------------------------------------------------

    \137\ Drago, R. and Lovell, V. (2011). San Francisco's Paid Sick 
Leave Ordinance: Outcomes for Employees and Employers. Institute for 
Women's Policy Research.
---------------------------------------------------------------------------

Government Expenditures
    As noted in the section on costs (V.C.ii.), contractors may pass 
along part or all of the potentially increased costs to the government 
in the form of higher contract prices. However, to the extent that 
benefits from increased productivity and reduced turnover offset these 
higher costs which the Department expects, this will reduce government 
contract spending relative to what would be expected if the rule's 
costs and transfers were considered in isolation.
    Some commenters believe the rule may reduce government contracting 
costs. Others noted that we did not adequately justify the assertion 
that the rulemaking will provide cost savings. The National Association 
of Manufacturers wrote the following: ``Simply stated, there is no 
concrete evidence that requiring federal contractors to increase the 
benefits they provide to their workers will result in cost savings or 
efficiency.'' As previously noted, the Department discussed benefits 
qualitatively because quantitative research findings related to 
benefits were not directly applicable to the population of employees 
and contracting firms impacted by this Final Rule.
    Regardless of the direct impact on contract costs, there are other 
important channels through which the Final Rule might affect government 
expenditures. The transfer of income resulting from this Final Rule may 
result in reduced social assistance payments, and thus decrease 
government expenditures. For example, providing access to paid sick 
leave may help workers retain their jobs, reducing eligibility for 
government social assistance programs and lowering government 
expenditures. Studies have shown that the more paid family leave an 
employee receives, the less likely he/she is to utilize various social 
assistance programs. For instance, a 2012 study by Rutgers University's 
Center for Women and Work showed that women who received paid maternity 
leave reported receiving $413 less in public assistance in the year 
after their child was born than women who took no leave after 
childbirth.\138\ The National Partnership for Women & Families also 
cited research showing that ``allowing all workers to earn paid sick 
time would result in . . . more than $500 million in savings to 
publicly funded health insurance programs such as Medicare, Medicaid 
and the State Children's Health Insurance Program.'' \139\
---------------------------------------------------------------------------

    \138\ Houser, L. and Vartanian, T. (2012). Pay Matters: The 
Positive Economic Impacts of Paid Family Leave for Families, 
Businesses, and the Public. Rutgers University, Center for Women and 
Work.
    \139\ Miller, K., Williams, C., and Youngmin Yi. (2011). Paid 
Sick Days and Health: Cost Savings from Reduced Emergency Department 
Visits. Institute for Women's Policy Research.
---------------------------------------------------------------------------

Decreased Healthcare Expenditures
    One positive impact of mandating paid sick leave benefits would be 
that employees could mitigate future health costs by more frequently 
investing in preventive care. For example, employees would likely use 
paid sick leave to visit a physician, who could diagnose illnesses and 
other ailments before they become more serious and costlier to 
patients. A study analyzing data from the 2008 NHIS shows that 
employees with paid sick leave were 12 percent more likely to have 
visited a doctor in the past year.\140\ Additionally, employees with 
paid sick leave were more likely to have received preventive procedures 
such as an endoscopy (9.6 percent) or mammogram (7.8 percent).\141\ 
Researchers at the Institute for Women's Policy Research used data from 
the NHIS on emergency room visits by workers with and without paid sick 
leave to project that requiring employers to provide paid sick leave 
would prevent roughly 1.3 million hospital emergency department visits 
nationally each year, resulting in $1.1 billion in medical savings 
annually (this includes the $500 million in savings to publicly funded 
health insurance programs mentioned previously).\142\
---------------------------------------------------------------------------

    \140\ Peipins, L., Soman, A., Berkowitz, Z., and White, M.C. 
(2012). The Lack of Paid Sick Leave as a Barrier to Cancer Screening 
and Medical Care Seeking. BMC Public Health, 12(250), 1-9.
    \141\ Ibid.
    \142\ Miller, K., Williams, C., and Youngmin Yi. (2011). Paid 
Sick Days and Health: Cost Savings from Reduced Emergency Department 
Visits. Institute for Women's Policy Research.
---------------------------------------------------------------------------

    Commenters agreed that the rule could reduce health care costs 
through preventative care and reduced use of emergency rooms. Several 
commenters wrote: ``A day or more to recover can prevent routine 
illnesses from turning into something much more serious. Those who earn 
paid time for a doctor's visit are more likely to get annual check-ups 
and critical screenings like mammograms, to identify any health 
problems and seek timely treatment. They're less likely to be injured 
on the job, and less likely to use an emergency room because the 
doctor's office is closed after hours or an untreated condition 
worsened.'' According to the National Partnership for Women & Families, 
individuals without paid sick time are ``almost three times as likely 
to report taking their child or a family member to a hospital emergency 
room because they were unable to take time off work during their 
regular work hours.\143\ The National Women's Law Center cited research 
finding ``one-third of workers with annual family incomes below $35,000 
who lacked paid sick days delayed seeking medical care, or

[[Page 67698]]

did not seek care, for an ill family member.'' \144\
---------------------------------------------------------------------------

    \143\ Smith, T.W. and Kim, J. (2010). Paid Sick Days: Attitudes 
and Experiences. National Opinion Research Center at the University 
of Chicago Publication. Available at: http://news.uchicago.edu/static/newsengine/pdf/100621.paid.sick.leave.pdf.
    \144\ Human Impact Partners. (2009). A Health Impact Assessment 
of the Healthy Families Act of 2009. Available at: http://www.humanimpact.org/downloads/national-paid-sick-days-hia-report/.
---------------------------------------------------------------------------

Job Growth and Labor Force Retention
    One critique of the proposal to mandate paid sick leave has been 
that the transfer of income from employers to employees might reduce 
employment. However, various studies have argued the opposite, claiming 
that paid sick leave are associated with greater job growth. Recently, 
it has been shown that counties in which a city has implemented paid 
sick leave have experienced greater job growth than neighboring 
counties with no cities with paid leave laws. San Francisco County, for 
example, saw a 3.5 percent increase in employment between the years of 
2006 (when a paid sick leave law was implemented) and 2010, while the 
five counties surrounding it experienced an employment decrease of 3.4 
percent on average (the analysis did not control for other 
characteristics that may affect employment or assess statistical 
significance).\145\ Additionally, King County, the county in which 
Seattle (which instituted a similar paid sick leave policy to San 
Francisco in 2011) is located, found that the rate of annual job growth 
in the food and retail industries increased much faster than within the 
state of Washington as a whole between 2011 and 2013.\146\ We note, 
however, that these results might also be associated with other 
economic factors, such as labor migration as a result of the Great 
Recession, and historically greater employment trends in the urban 
areas of San Francisco and Seattle in comparison to neighboring 
regions.
---------------------------------------------------------------------------

    \145\ Petro, J. (2010). Paid Sick Leave Does Not Harm Business 
Growth or Job Growth. Drum Major Institute for Public Policy.
    \146\ The Main Street Alliance of Washington. (2013). Paid Sick 
Days and the Seattle Economy: Job Growth and Business Formation at 
the 1-year Anniversary of Seattle's Paid Sick and Safe Leave Law.
---------------------------------------------------------------------------

    Job growth was not mentioned by many commenters. However, Legal Aid 
Society cited a study that found ``the sectors most affected by the 
ordinance, including the food service and accommodation [industries], 
experienced higher rates of job and business growth than neighboring 
counties following the [San Francisco] ordinance's passage.'' \147\
---------------------------------------------------------------------------

    \147\ Miller, K. and Towne, S. (2011). San Francisco Employment 
Growth Remains Stronger With Paid Sick Days Law Than Surrounding 
Counties. Institute for Women's Policy Research.
---------------------------------------------------------------------------

    A related topic discussed by some commenters is that paid sick 
leave can prevent workers from leaving the labor force. The New 
Hampshire Campaign for a Family Friendly Economy noted, ``[w]hen 
families are able to provide for their basic needs and know that their 
loved ones are well cared for they are more likely to stay in the 
workforce.'' Sarah Damaske, a researcher from Pennsylvania State 
University, wrote: ``Access to paid sick leave is an important feature 
of the types of jobs that college educated women find and that helps 
workers maintain their employment.'' She explained how research she and 
Adrianne Frech conducted suggests that maintaining full-time employment 
has long-term physical and mental health benefits.
2. Benefits Mentioned by Commenters Not Previously Addressed in This 
Section
Expanded Covered Reasons for Use
    Commenters discussed the benefits associated with expanding 
applicable uses of leave. In this rulemaking, the Department estimates 
transfers by comparing current days of paid sick leave and newly 
mandated days of sick leave. Benefits are then associated with 
additional sick days provided and expected to be taken. The Department 
notes that workers who currently have access to paid sick leave may 
take more sick days to the extent the permitted uses under the 
Executive Order and this Final Rule are broader than under their 
existing paid sick leave or paid time off program. This impact is not 
quantified in benefits or transfers due to a lack of applicable 
quantitative evidence. The Williams Institute at the UCLA School of Law 
wrote ``[t]he Propose[d] Rule could protect many more LGBT employees 
who may not currently be able to use their paid sick leave to care for 
their families.'' They also wrote that the rule ``would also allow 
employees to care for the children of a same-sex spouse or partner, 
even when the employee has not been able to form a legal relationship 
with the child, for example, because of obstacles to adoption, parental 
status, or custody.'' Legal Aid Society wrote that the rule ``will 
increase job security for workers and families who have fewer workplace 
protections, such as LGBT workers, and for workers who need paid sick 
time to ensure their safety, such as survivors of domestic violence.''
    Allowing paid sick leave to be used by victims of domestic 
violence, sexual assault, and stalking also provides benefits. 
According to surveys from the Bureau of Justice Statistics, reported by 
the National Partnership for Women & Families, ``36 percent of rape and 
sexual assault victims lost more than 10 days of work following 
victimization, and more than half of stalking victims lost five or more 
days of work.'' \148\
---------------------------------------------------------------------------

    \148\ Bureau of Justice Statistics, U.S. Department of Justice. 
(2013). Stalking. Available at: http://www.bjs.gov/index.cfm?ty=tp&tid=973; Bureau of Justice Statistics, U.S. 
Department of Justice. (2002). National Crime Victimization Survey: 
Personal and Property Crimes, 2000.
---------------------------------------------------------------------------

Disadvantaged Groups
    As discussed above, the rulemaking may be especially helpful to the 
LGBT community by allowing paid sick leave to be used to care for 
certain individuals not related by blood or marriage. Additionally, 
some minority groups, women, and low-wage earners, who have lower 
prevalence of paid sick leave, will be helped by this rule. The Center 
for the Study of Social Policy wrote: ``[P]aid sick time can be an 
effective tool for advancing equity by providing crucial economic 
stability to families and reducing familial stress during illnesses and 
times of hardship,'' and observed that ensuring the ability to accrue 
and use paid sick leave is particularly important for part-time, low-
income and single head of household workers who are disproportionately 
women and people of color. The National Hispanic Council on Aging 
wrote: ``According to a report released by the Congressional Joint 
Economic Committee in March, 2010, about 49% of Hispanics working for 
firms hiring over 15 employees did not have paid sick leave, while 
about 60% of White workers overall reported receiving paid sick 
leave.'' \149\ According to the AFL-CIO: ``Those with lower incomes are 
especially vulnerable to the lack of paid sick days. Sixty-two percent 
of low-wage private sector workers do not have employer-paid sick 
leave.'' \150\
---------------------------------------------------------------------------

    \149\ Congressional Joint Economic Committee. (2010). Expanding 
Access to Paid Sick Leave: The Impact of the Healthy Families Act on 
America's Workers. Available at: http://www.jec.senate.gov/public/_cache/files/abf8aca7-6b94-4152-b720-2d8d04b81ed6/sickleavereportfinal.pdf.
    \150\ Institute for Women's Policy Research. (2015). Workers' 
Access to Paid Sick Days in the States; DeRigne, L., Stoddard-Dare, 
P., and Quinn, L. (2016). Workers Without Paid Sick Leave Less 
Likely To Take Time Off For Illness Or Injury Compared To Those With 
Paid Sick Leave. Health Affairs, 35(3), 520-527. (The AFL-CIO 
compared the nearly 65 percent of families with incomes below 
$35,000 who had no paid sick leave to the 25 percent of families who 
earned more than $100,000 a year).
---------------------------------------------------------------------------

    The National Organization for Women noted that ``[t]he burden of 
inadequate paid sick leave and paid sick family leave falls heaviest on 
mothers. Given current norms of caregiving, women are more likely to 
need to stay home with a sick family member than fathers, yet mothers 
are less likely than fathers to

[[Page 67699]]

have any paid time off, and those who do have some paid leave have 
fewer weeks of paid time off than dads.'' \151\ They also noted that 
``[s]ingle parent families, mostly headed by women, are 
disproportionately affected by the inability to access paid sick 
leave.''
---------------------------------------------------------------------------

    \151\ Phillips, K.R. (2004). Getting Time Off: Access to Leave 
among Working Parents. The Urban Institute. Available at: http://www.urban.org/sites/default/files/alfresco/publication-pdfs/310977-Getting-Time-Off.PDF.
---------------------------------------------------------------------------

Fair Competition
    One business owner wrote: ``this rule will help level the playing 
field so that businesses, like mine, that provide earned paid leave, 
are more cost competitive. Right now we compete against other companies 
that do not provide these benefits to their employees, therefore these 
competitors have lower overhead and lower hourly rates.'' The public 
policy organization Demos cited their report that quantified ``how the 
federal contracting system fuels inequality by funding low-wage jobs 
that lack critical benefits such as leave.'' \152\ The U.S. Women's 
Chamber of Commerce wrote: ``Requiring more businesses to provide paid 
sick leave will help level the playing field for those business owners 
who are doing the right thing for their workers.'' Bredhoff & Kaiser 
cited a 2015 study by the Department that found lack of paid sick leave 
results in competitive disadvantages against those employers who do 
provide such paid leave.\153\
---------------------------------------------------------------------------

    \152\ Hiltonsmith, R. and Daly, L. (2014). Underwriting Good 
Jobs: How to Place over 20 Million Americans on a Pathway to the 
Middle Class Using Federal Purchasing Power. Available at: http://www.demos.org/publication/underwriting-good-jobs-how-place-over-20-million-americans-pathway-middle-class-using-fe.
    \153\ U.S. Department of Labor. (2015). The Cost of Doing 
Nothing--The Price We All Pay Without Paid Leave Policies to Support 
America's 21st Century Working Families.
---------------------------------------------------------------------------

Morale, Stress, Financial Stability, and Job Retention
    Commenters noted that the rule could help morale. Many commenters 
cited a study of Connecticut's paid sick leave law that found 
``employers identified several positive effects of paid sick days, 
including improved employee productivity and morale.'' \154\ This study 
found 29.6 percent of employers reported an increase in morale and 12.5 
reported an increase in motivation. According to the Americans United 
for Change: ``In jurisdictions where paid sick leave has been 
implemented, research has shown that businesses reported positive 
benefits such as improved morale.'' \155\
---------------------------------------------------------------------------

    \154\ Appelbaum, E., et al. (2014). Good for Business? 
Connecticut's Paid Sick Leave Law. Center for Economic and Policy 
Research and The Murphy Institute at the City University of New York 
Publication. Available at: http://cepr.net/documents/good-for-buisness-2014-02-21.pdf.
    \155\ Ibid.
---------------------------------------------------------------------------

    Commenters believe the rule will reduce stress and improve 
financial and job stability. NLWC noted that ``a lack of paid time off 
can be a major stressor in parents' lives, which can impair their 
interactions with their children and affect their development.'' \156\ 
Bredhoff & Kaiser wrote: ``As one 2011 report observed, missing just 
three and a half days of work due to illness can cause a worker to 
forfeit wages equivalent to the average monthly grocery bill for an 
American family.'' \157\ NWLC cited research finding ``almost one in 
five low-wage working mothers reported losing a job due to her own 
illness or caring for a family member.'' \158\ Job stability benefits 
may accrue to both workers with and without current paid sick leave. 
According to the AFL-CIO, ``49 percent of private sector workers who 
have paid sick leave report that their employers have dismissal 
policies for missed time that, in practice, penalize their use of paid 
sick time, and 34 percent fear penalties for using paid sick leave.'' 
\159\ This Final Rule may reduce employees' fear of retribution because 
the rule proscribes interference and discrimination.
---------------------------------------------------------------------------

    \156\ Vogtman, J. and Schulman, K. (2016). Set Up To Fail: When 
Low-Wage Work Jeopardizes Parents' And Children's Success. National 
Women's Law Center. Available at: http://nwlc.org/wp-content/uploads/2016/01/FINAL-Set-Up-To-Fail-When-Low-Wage-Work-Jeopardizes-Parents%E2%80%99-and-Children%E2%80%99s-Success.pdf.
    \157\ Green, A., Filion, K., and Gould, E. (2011). The Need for 
Paid Sick Days. Economic Policy Institute. Available at: http://www.epi.org/publication/the_need_for_paid_sick_days/.
    \158\ Vogtman, J. and Schulman, K. (2016). Set Up To Fail: When 
Low-Wage Work Jeopardizes Parents' And Children's Success. National 
Women's Law Center. Available at: http://nwlc.org/wp-content/uploads/2016/01/FINAL-Set-Up-To-Fail-When-Low-Wage-Work-Jeopardizes-Parents%E2%80%99-and-Children%E2%80%99s-Success.pdf.
    \159\ Miller, K., Drago, R., and Williams, C. (2011). Paid Sick 
Days and Employer Penalties for Absence. Institute for Women's 
Policy Research.
---------------------------------------------------------------------------

vi. Regulatory Alternatives
    The Department notes that Executive Order 13706 delegates to the 
Secretary the authority only to issue regulations to ``implement the 
requirements of this order.'' Because the Executive Order itself 
establishes the basic paid sick leave requirements that the Department 
is responsible for implementing, many potential regulatory alternatives 
are beyond the scope of the Department's authority in issuing this 
Final Rule. However, the Chamber/IFA expressed concern that the 
Department did not present alternatives and wrote ``it is a well-
established principle of regulatory impact analysis under Executive 
Order 12866 to present comparative costs and benefits for various 
alternatives, including those the underlying law or Executive Order may 
seem to exclude.'' In response, the Department has discussed some 
alternatives posed by commenters in this section.
1. Alternative With Unlimited Accrual
    As was done in the NPRM, for illustrative purposes only, this 
section presents an alternative to the provisions set forth in this 
Final Rule. The Department notes, however, that it considers this 
alternative to be beyond the scope of the Department's authority under 
the Executive Order. This alternative considers how transfer payments 
would be affected if employees could accrue an unlimited number of 
hours of paid sick leave, as long as they kept a maximum balance of 56 
hours. For example, if paid sick leave is used periodically throughout 
the year, an employee who works 80 hours per week could accrue and use 
138.7 hours of paid sick leave (80 hours x 52 weeks x accrual rate of 
one hour per 30 hours worked (1/30)). To calculate transfers associated 
with this alternative, the modeling allows employees to accrue more 
than 7 days of paid sick leave annually. The number of days of leave 
accrued is based on the mean number of hours worked among full-time 
employees in an industry. For example, in administrative and waste 
services full-time employees work on average 41.7 hours per week. With 
no cap on paid leave accrual, this would result in 9.0 days of leave 
accrued annually for employees in this industry. Using this alternative 
across all industries, the Department estimated 1.2 million additional 
days of paid sick leave would be accrued by full-time employees in Year 
1. If only a fraction of these additional sick days are actually taken 
(as assumed earlier in the analysis and shown in Table 12) then 488,200 
days will be taken by full-time employees and total transfer payments 
would be $132.0 million. This is 54 percent higher than the current 
transfer estimate of $85.5 million. However, this might be an 
overestimate because employees are not required to accrue paid sick 
leave while on vacation or leave.
2. Alternatives Suggested by Commenters
    Some commenters made suggestions that could help reduce costs while 
maintaining the intent of the rulemaking and continuing to provide the 
intended benefits. Some of these have been incorporated in the Final 
Rule. The

[[Page 67700]]

impact of these alternatives on costs was generally not quantifiable.
    The American Benefits Council believes the requirement that 
employers allow paid leave in increments of only 1 hour could cost tens 
of thousands of dollars in adjustment costs which is ``an excessive 
burden on such employers, and serves only to preserve an extra 3 hours 
of paid leave for the employee.'' The Department believes that changing 
a firm's tracking system to allow paid sick leave to be taken in 
increments of one hour is not excessively burdensome, and the American 
Benefits Council provided no basis for its estimate. The Department 
also did not have the necessary data to estimate the impact on 
regulatory costs of allowing a larger minimum hour requirement.
    Commenters believe the requirement to allow accrual of paid sick 
leave while on leave (e.g., sick leave, vacation) will be costly to 
firms. The Equal Employment Advisory Council (EEAC) believes because 
this definition of ``hours worked'' differs from the FLSA and FMLA this 
requirement will ``be extremely confusing for federal contractors'' and 
``changing the established rules and procedures for one particular set 
of regulations will be significantly more difficult, requiring an 
additional set of records that must be kept.'' They also noted that 
``counting hours not actually `worked' as `hours worked' artificially 
inflates the employee's entitlement under the Executive Order, which 
likely used that term of art in accord with its traditional meaning.'' 
The Department adjusted this requirement such that paid sick leave is 
only required to be earned on time suffered or permitted to work and 
not paid time off. The transfer estimates presented in this analysis 
continue to include accrual while on leave because of the difficulty in 
adjusting them due to lack of reliable data; furthermore, these 
adjustments are likely to be small since hours on vacation and paid 
sick leave are a fraction of work hours and the paid sick leave time 
that might be accrued in those periods will only be one-thirtieth of 
the hours spent on vacation and sick leave (see V.C.iii.2.).
    The Department notes that this change may reduce employer costs by 
creating consistency across regulations. However, the Department 
believes this change will have a small impact on the amount of leave 
full-time employees accrue because annual accrual is limited to 56 
hours. A worker who works 40 hours per week will reach this cap after 
42 weeks of work. Therefore, even if they are on vacation/leave for the 
other 10 weeks and technically accruing leave, this will not increase 
their accrued hours. For part-time workers accruing while on vacation 
or leave, this change will impact total hours accrued. The Department 
made some calculations to demonstrate how transfers may change for the 
19 percent of affected workers who work part-time now that accrual is 
not required while on leave. We quantified the additional hours accrued 
due to accruing while on paid sick leave and found it to be small. For 
example, a worker who works 25 hours per week will accrue 43.3 hours of 
paid sick leave annually (assuming no leave). If this worker takes a 
week of sick leave, and paid sick leave is not accrued during this 
week, then he will accrue 0.8 hours less of paid sick leave (25/30). If 
this worker also took two weeks of vacation, he would accrue 1.7 fewer 
hours of paid sick leave ((25 x 2)/30).
vii. Average Annualized Impacts by Industry
    Commenters expressed concern that the Department did not adequately 
consider costs for specific industries. For example, the MCAA wrote 
that OMB Circular A-4 requires a more specific examination of the 
impact of the rule on Federal construction projects. A recreation 
permit holder on public lands wrote that the Department ``should 
demonstrate how the costs associated with the rule make sense given the 
. . . volume and gross revenues of small permit holders.'' In response, 
the Department has added this section analyzing average annualized 
costs and transfers by industry relative to payroll and revenue.
    Table 17 shows 10-year average annualized costs and transfers by 
industry using both a 3 percent and a 7 percent interest rate. These 
annualized costs are then compared to estimated Federal contractors' 
payroll and revenue. Across all industries, these average annualized 
costs are less than 0.07 percent of payroll and less than 0.01 percent 
of revenue. The industry where costs and transfers are the largest 
share of both payroll and revenue is the professional, scientific, and 
technical services industry. This industry is followed by the 
construction industry (when looking at payroll) and the administrative 
and waste services industry (when considering revenue).

                                                    Table 17--Average Annualized Costs and Transfers
                                                                    [1,000s of 2015$]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Average annualized costs and       Relative to payroll \a\         Relative to revenue \a\
                                                                transfers (1,000s)       ---------------------------------------------------------------
                Industry                       NAICS     --------------------------------
                                                            3% Discount     7% Discount     3% Discount     7% Discount     3% Discount     7% Discount
                                                               rate            rate            rate            rate            rate            rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and                    11            $349            $384           0.015           0.016           0.003           0.003
 hunting................................
Mining..................................              21              61              68           0.001           0.001           0.000           0.000
Utilities...............................              22             715             721           0.001           0.001           0.000           0.000
Construction............................              23          44,397          42,986           0.168           0.163           0.034           0.033
Manufacturing...........................           31-33          12,189          12,143           0.008           0.007           0.001           0.001
Wholesale trade.........................              42             966           1,090           0.003           0.003           0.000           0.000
Retail trade............................           44-45          17,126          16,605           0.167           0.162           0.015           0.014
Transportation and warehousing..........           48-49          27,132          26,257           0.139           0.134           0.034           0.032
Information.............................              51           3,900           3,866           0.006           0.006           0.001           0.001
Finance and insurance...................              52           4,298           4,150           0.071           0.069           0.010           0.010
Real estate and rental and leasing......              53             795             882           0.012           0.013           0.002           0.002
Professional, scientific, and technical.              54         162,894         157,110           0.208           0.201           0.081           0.078

[[Page 67701]]

 
Management of companies and enterprises.              55               7               9           0.000           0.000           0.000           0.000
Administrative and waste services.......              56          53,427          51,586           0.149           0.144           0.073           0.071
Educational services....................              61           4,903           4,792           0.025           0.025           0.008           0.008
Health care and social assistance.......              62          39,867          38,397           0.115           0.111           0.045           0.044
Arts, entertainment, and recreation.....              71           4,234           4,226           0.027           0.027           0.009           0.009
Accommodation and food services.........              72           8,712           8,464           0.146           0.142           0.042           0.041
Other services..........................              81           3,167           3,149           0.078           0.078           0.020           0.020
                                         ---------------------------------------------------------------------------------------------------------------
    Total private.......................  ..............         389,139         376,884           0.065           0.063           0.010           0.009
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Source: Total payroll and revenue from 2012 SUSB; inflated to 2015$ using the CPI-U. Payroll and revenue for contractors estimated by taking ratio
  of potentially affected contractors relative to all firms, within an industry, and multiplying by total payroll or revenue. If contractors tend to be
  larger or smaller than other firms in the industry then revenue and payroll may be under or over estimated. These calculations assume no growth in
  real value of revenue or payroll over these ten years.

    Many commenters expressed concern that the rule would be especially 
costly in the construction industry. However, as modeled, costs in the 
construction industry are small compared with payroll and revenues 
(less than 0.2 percent of payroll and less than 0.04 percent of 
revenue). Moreover, the Department does not believe that one of the 
primary concerns for the construction industry--the segregating of time 
between Federal contracts and non-covered contracts (e.g., SBA 
Advocacy, Sheet Metal and Air Conditioning National Association)--will 
result in substantial costs because hours worked by laborers and 
mechanics on DBA contracts must already be monitored. 29 CFR 5.5(a)(3). 
Thus, in nearly all instances, if a construction contractor complies 
with its existing DBA recordkeeping obligation, it will have 
effectively segregated these employees' time. Therefore, there should 
be minimal, or no, additional costs associated with tracking hours for 
these employees. In addition, for employees working ``in connection 
with'' covered contracts the Department has reduced the costs 
associated with monitoring hours by permitting contractors to make 
estimates consistent with Sec.  13.5(a)(1)(i). For these reasons, we 
believe the estimated costs to the construction industry are 
appropriate.
    Another concern expressed by members of the construction industry 
is the higher costs associated with absenteeism in this industry. The 
AGC noted that ``absenteeism is particularly problematic in the 
construction industry, where cost and schedule concerns are critical 
and highly dependent on labor productivity.'' They also cite research 
demonstrating these costs: ``Nicholson et al. (2006) \160\ have used 
economic models to estimate that when a carpenter in construction is 
absent, the cost of the absence is 50% greater than his/her daily wage, 
and when a laborer in construction is absent, the cost is 9% greater 
than his/her daily wage.'' The Department notes that even if costs and 
transfers are 50 percent larger than estimated, they would still be 
less than 0.3 percent of payroll and less than 0.06 percent of revenues 
in the construction industry.
---------------------------------------------------------------------------

    \160\ Nicholson, S., Pauly, M.V., Polsky, D., Sharda, C., Szrek, 
H., and Berger, M.L. (2006). Measuring the effects of work loss on 
productivity with team production. Health Economics, 15(2), 111-123.
---------------------------------------------------------------------------

Appendix A

        Table 18--Percent of Workers With Fixed Number of Paid Sick Leave Plans, by Number of Days Offered, Private Industry Workers, March 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                           10 to 14     15 to 29
                           Industry                              <5 days    5 to 9 days      days         days       >29 days    Mean days   Median days
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting...................  ...........  ...........  ...........  ...........  ...........  ...........  ...........
Mining and logging...........................................  ...........           42           15  ...........  ...........           27            6
Utilities....................................................  ...........           34           38  ...........  ...........           21           10
Construction.................................................           31           57           11  ...........  ...........            6            5
Manufacturing................................................           30           53           12  ...........  ...........            8            5
Wholesale trade..............................................           26           61            8  ...........  ...........            8            5
Retail trade.................................................           21           70            7  ...........  ...........            6            6
Transportation and warehousing...............................           16           44           34  ...........  ...........            9            7
Information..................................................            6           65           26  ...........  ...........            9            7
Finance and insurance........................................            7           49           39  ...........  ...........           12            8
Real estate and rental and leasing...........................  ...........           65  ...........  ...........  ...........            6            6
Professional, scientific, and................................           11           59           22  ...........  ...........            8            6
Management of companies and..................................           14           66  ...........  ...........  ...........           12            6
Administrative and waste services............................           36           40           22  ...........  ...........            8            5
Educational services.........................................            8           35           52  ...........  ...........           11           10

[[Page 67702]]

 
Health care and social assistance............................           22           42           34  ...........  ...........            8            7
Arts, entertainment, and recreation..........................  ...........           47  ...........  ...........  ...........            6            6
Accommodation and food services..............................           37           58  ...........  ...........  ...........            6            5
Other services...............................................           22           47           21  ...........  ...........            8            6
                                                              ------------------------------------------------------------------------------------------
    Total private............................................           21           53           21            3            2            8            6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Bureau of Labor Statistics, National Compensation Survey; Unpublished data
Note: Dashes indicate data not available or do not meet publication criteria.


               Table 19--DOL Calculated Percent of Full-Time Workers With Fixed Number of Paid Sick Leave Plans, by Number of Days Offered
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Number of days \a\
                           Industry                            -----------------------------------------------------------------------------------------
                                                                   1        2        3        4        5        6        7        8        9        10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting....................        1        3        8       16       10       13       12       12       11        8
Mining and logging............................................        0        0        0        0        9       41        3        9       29        0
Utilities.....................................................        0        0        0        0        0        1        4       12       29        3
Construction..................................................        2        5       11       17       16       14       13       10        7        6
Manufacturing.................................................        1        4       11       23       10       10       12       12       11        5
Wholesale trade...............................................        1        4       11       22       13       12       14       14       13        3
Retail trade..................................................        1        3        6        9       16       16       16       12        8        4
Transportation and warehousing................................        0        2        6       13        6       10       13       11       12       11
Information...................................................        0        1        2        5        9       14       19       16       17        8
Finance and insurance.........................................        0        1        2        6        3        7       12       19       19        8
Real estate and rental and leasing............................        1        4        7       11       13       14       14       11        8        3
Professional, scientific, and technical services..............        0        2        5       10       14       19       13       14       13        8
Management of companies and enterprises.......................        0        2        7       20        7       14       12       19       26        0
Administrative and waste services.............................        1        4       12       25        7        8        9        9        9        8
Educational services..........................................        0        0        2        5        2        4        6        9       11       11
Health care and social assistance.............................        1        2        7       14        7        9       11       10        9       13
Arts, entertainment, and recreation...........................        1        4        9       13       11       12       10        8        6       12
Accommodation and food services...............................        2        5       11       17       14       15       13       10        7        2
Other services................................................        1        3        8       17        9       12       11       11       10        8
                                                               -----------------------------------------------------------------------------------------
    Total private.............................................        1        3        8       16       10       13       12       12       11        8
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Workers may receive more than 10 days of sick leave but since these data are not used in the analysis the Department does not present shares above
  10 days.


               Table 20--DOL Calculated Percent of Part-Time Workers With Fixed Number of Paid Sick Leave Plans, by Number of Days Offered
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Number of days \a\
                           Industry                            -----------------------------------------------------------------------------------------
                                                                   1        2        3        4        5        6        7        8        9        10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting....................        1        3        8       14       11       13       12       11        9        8
Mining and logging............................................        0        0        0        0       10       40        3       10       27        0
Utilities.....................................................        0        0        0        0        1        2        5       13       27        3
Construction..................................................        2        6       11       15       16       15       12        8        5        5
Manufacturing.................................................        1        5       12       21       11       11       12       11        9        4
Wholesale trade...............................................        1        4       11       20       14       13       14       12       10        3
Retail trade..................................................        1        3        6        8       16       15       14       10        6        3
Transportation and warehousing................................        1        2        6       12        7       10       12       10        9       11
Information...................................................        0        1        2        5       11       15       17       15       13        8
Finance and insurance.........................................        0        1        2        6        4        8       12       16       16        8
Real estate and rental and leasing............................        2        4        7       10       14       13       13        9        5        3
Professional, scientific, and technical services..............        1        2        5        9       15       18       13       12       10        8
Management of companies and enterprises.......................        0        2        7       18        8       15       13       18       21        0
Administrative and waste services.............................        1        5       13       23        8        9        9        8        7        8
Educational services..........................................        0        1        2        5        3        5        7        8        9       11
Health care and social assistance.............................        1        3        7       13        7        9        9        9        7       12
Arts, entertainment, and recreation...........................        2        5        9       12       12       11       10        7        4       11
Accommodation and food services...............................        2        6       11       15       15       15       12        8        5        2
Other services................................................        1        4        8       15       10       12       11       10        8        8
                                                               -----------------------------------------------------------------------------------------
    Total private.............................................        1        3        8       14       11       13       12       11        9        8
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Workers may receive more than 10 days of sick leave but since these data are not used in the analysis the Department does not present shares above
  10 days.


[[Page 67703]]

V. Final Regulatory Flexibility Analysis (FRFA)

    The Regulatory Flexibility Act of 1980 (RFA), as amended by the 
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 
hereafter jointly referred to as the RFA, requires agencies to prepare 
regulatory flexibility analyses when they propose regulations that will 
have a significant economic impact on a substantial number of small 
entities. See 5 U.S.C. 603. This rule is expected to have a significant 
economic impact, and thus the Department has prepared a FRFA.
    The RFA defines a ``small entity'' as a (1) small not-for-profit 
organization, (2) small governmental jurisdiction, or (3) small 
business. SBA establishes separate standards for each 6-digit NAICS 
industry code, and standard cutoffs are typically based on either the 
average annual number of employees or average annual receipts. For 
example, small businesses are generally defined as having fewer than 
500, 1,000, or 1,250 employees in manufacturing industries and less 
than $7.5 million in average annual receipts for many nonmanufacturing 
industries.\161\ SBA revised its size standards February 26, 2016.\162\ 
In this analysis, the Department used the indicator in the SAM data to 
identify small contractors based on the six-digit NAICS code listed as 
their primary NAICS.\163\ However, because most firms would have 
registered on SAM prior to SBA's update of its size standards, the 
Department expected more firms would have been listed as small had they 
registered after the update. To account for this, the Department used 
SBA's estimates of the increase in the number of small business in each 
industry,\164\ converted it to a percentage increase in the number of 
small businesses in that industry, and applied it to the number of 
entities listed as small in the SAM database. For example, SBA 
estimated the revised standards would result in an additional 1,250 
manufacturers classified as small, about 0.5 percent of small 
manufacturing firms. We therefore increased the number of small 
affected manufacturers by 0.5 percent. The subcontracting firms 
identified were all assumed to be small. The Department applied the 
national ratio of small businesses to total business by industry 
(determined by applying the updated SBA standards to the 2012 
Statistics of U.S. Businesses (SUSB) data) to estimate the number of 
small entities operating under covered contracts on Federal property.
---------------------------------------------------------------------------

    \161\ However, some exceptions do exist, the most notable being 
that depository institutions (including credit unions, commercial 
banks, and non-commercial banks) are classified by total assets. 
Small governmental jurisdictions are another noteworthy exception. 
They are defined as the governments of cities, counties, towns, 
townships, villages, school districts, or special districts with 
populations of less than 50,000 people. See http://www.sba.gov/advocacy/regulatory-flexibility-act.
    \162\ See https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.
    \163\ The ``NAICS CODE STRING'' variable (column 33) and the 
``PRIMARY NAICS'' variable (column 31) were the specific variables 
used. If the primary NAICS value contained a ``Y'' at the end when 
listed in the ``NAICS CODE STRING'' column, the firm was identified 
as small.
    \164\ See https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sba-size-standards/whats-new-size-standards.
---------------------------------------------------------------------------

A. Commenters' Response

    The Department specifically asked for comments on the impacts of 
the proposed rule on small businesses, particularly whether 
alternatives exist that will reduce burdens on small entities and still 
meet the rule's objectives. Most small businesses that commented 
expressed concern the rulemaking will increase their costs in general. 
Some noted the costs will be more burdensome for small businesses. The 
National Federation of Independent Business wrote:

    At the majority of these [small] businesses, the task of 
compliance will fall on the small business owner. This individual is 
unlikely to be an expert in the complex details of paid sick leave 
program management. Accordingly, it will take additional time to 
comprehend the requirement and may also require the covered small 
business to hire a consultant or other expert to assist with 
implementation.

    Women Impacting Public Policy wrote that ``[l]arger contractors 
with higher revenues and large administrative staffs are more capable 
of handling this compliance burden and are more likely to already have 
the necessary systems in place. Women-owned businesses, which are by-
and-large small businesses, will encounter costs and burdens that are 
not experienced by other firms.''
    Other small businesses supported the rulemaking. For example, the 
U.S. Women's Chamber of Commerce wrote: ``These women business owners 
nationwide already provide paid sick leave to their employees because 
many of them have been previously in workforces that did not offer 
these critical benefits . . . Requiring more businesses to provide paid 
sick leave will help level the playing field for those business owners 
who are doing the right thing for their workers.''
    Commenters questioned the Department's estimated implementation and 
regulatory familiarization cost estimates. Other commenters argued that 
the administrative costs are more burdensome for small businesses. The 
National Electrical Contractors Association wrote that ``smaller 
companies usually only have a single person--at the most two 
employees--that handle time keeping and record keeping of items such as 
this requirement.'' A small business owner commented that he offers 
paid time off, and that ``[g]oing backwards to a mandatory `sick time' 
including tracking with all of the required documentation would add 
more complications.'' Other commenters stated that the definition of 
family in the NPRM lowers the administrative costs compared to more 
restrictive definitions. A small business owner stated that 
administrative efficiency was improved and wrote: ``As a small business 
owner, the administrative hassle of having to dig into employee's 
personal life to determine their eligibility is not worth the effort. 
Any specific limitations on the proposed definition of family would 
only increase the administrative burden.'' As noted in Section V.C.ii. 
the Department has increased the estimated time required for regulatory 
familiarization and recurring administrative costs for this Final Rule.
    Last, in terms of specific costs, commenters expressed skepticism 
about the average payroll increase estimates for small businesses. SBA 
Advocacy stated that ``a small recreation company with 20 full-time 
staff and 220 seasonal workers estimated costs of $25,000 to comply 
with this regulation. Multiple small restaurant franchisees located in 
military bases reported costs from $5,000 to $35,000.'' However, these 
estimates are difficult to evaluate because we do not know what 
assumptions were made in developing them and furthermore what ``costs'' 
are included in these estimates.
    Some commenters believe the Executive Order and implementing 
regulations will hurt small businesses' ability to compete in bidding. 
SBA Advocacy noted that ``[s]mall recreation companies have stated that 
they will be reluctant to sign a new contract to provide services such 
as food or equipment rentals on federal lands, as they may not be able 
to increase the price of their products to offset these costs.'' The 
National Federation of Independent Business wrote that ``[m]ost small 
companies will have to increase the price of their bids to maintain the 
same return on the contract. Higher prices will make their bids less 
competitive than a larger federal contractor that may already have a 
compliant paid sick leave program in place.''

[[Page 67704]]

    Some commenters suggested alternatives that would reduce the burden 
on small entities, including an exemption for small businesses. Several 
commenters, such as the General Contractors Association of Hawaii and 
the Hawaiian Dredging Construction Company, stated that small 
businesses should be exempt from the requirement of providing paid sick 
leave, although they varied on the size of contracting firms that 
should be excluded. Independent Electrical Contractors commented that 
``the Department should take into account processes and procedures 
already in place in most small businesses,'' and further recommended 
that the Department should allow companies to ``apply a 90 day 
probationary period to new employees before they are able to take paid 
sick leave.'' SBA Advocacy stated that DOL should consider alternatives 
suggested by commenters ``such as exemptions for certain part-time and 
seasonal work.'' The Department has addressed requests for exclusions, 
like those described above, in the subpart A preamble.
    The Chief Counsel for Advocacy of the Small Business Administration 
(SBA) was notified of this rule upon its submission to OMB under EO 
12866. Advocacy noted several concerns; in addition to those described 
in the preceding paragraphs, it stated that the Department 
underestimated the number of small businesses affected by this Final 
Rule by only including contracting companies registered in SAM. SBA 
Advocacy wrote: ``Advocacy believes that there may be hundreds or 
thousands of small businesses such as restaurants, retail, and outdoor 
recreation companies operating on federal lands, in federal buildings 
and on military bases that DOL has not adequately counted in 
determining the numbers of small businesses affected or in estimating 
the costs of this rule.'' SBA Advocacy provided additional information 
about the number of concessions contracts, commercial use 
authorizations, and permits issued by the National Park Service, the 
U.S. Forest Service, GSA, and the Army and Air Force Exchange Service. 
As described in section V.B.ii., the Department included estimates of 
these potentially affected contractors in this Final Rule.
    The Department describes responses to some of these comments in the 
appropriate part of the FRFA. Responses to comments that also apply to 
the overall analysis were generally included in the appropriate section 
of the RIA.

B. Number of Small Entities and Employees to Which the Final Rule Will 
Apply

    The number of prime contracting entities was estimated based on the 
GSA's System for Award Management (SAM) for August 2015 (415,300).\165\ 
This number is lower than in the proposed rulemaking because firms 
enrolled on SAM strictly for grants have now been excluded (see 
V.B.ii).\166\ The Department understands that many entities that are 
prime contractors listed in SAM are also subcontractors, and therefore 
SAM includes both. However, we were unable to determine the number of 
subcontractors who are not in the SAM database. Therefore, the 
Department examined five years of USASpending data \167\ and found 
24,400 subcontractors who do not hold contracts as primes (and thus may 
not be included in SAM), and added these subcontractors to the total 
from SAM to obtain a total estimate of 439,700 firms that may be 
holding procurement contracts. In response to comments from SBA 
Advocacy and others, the Department has also included an estimated 
49,800 entities operating under covered contracts on Federal property 
or lands. Estimating the number of entities operating under covered 
contracts on Federal property or lands involved many data sources and 
assumptions as described in section V.B.ii. These calculations result 
in 489,400 potentially affected contractors. Of these, an estimated 
320,000 are considered small contracting firms.\168\
---------------------------------------------------------------------------

    \165\ Data are released in monthly files.
    \166\ Entities registering in SAM are asked if they wish to bid 
on contracts. If a non-Federal entity answers ``Yes'' to this 
question, SAM marks the registration as being ``All Awards.'' This 
is the ``Purpose of Registration'' column in the SAM data. The 
Department included only firms with a value of ``Z2,'' which denotes 
``All Awards.'' See section ``3.2 Determining your Purpose of 
Registration'' in the System for Award Management User Guide 
available at: https://test.sam.gov/sam/SAM_Guide/SAM_User_Guide.htm#_Toc330768975.
    \167\ The Department identified subawardees from the 
USASpending.gov data between FY2011 and FY2015 who did not perform 
work as a prime during those years.
    \168\ SAM data for August 2015 provides information on which 
contractors are small. All subcontractors (identified with 
USASpending data for FY2011-FY2015) are considered small due to lack 
of data. The proportion of entities operating under covered 
contracts on Federal property or lands that are small were assumed 
to be the same as the national proportions in 2012 SUSB data. These 
proportions were calculated and applied by industry.
---------------------------------------------------------------------------

    This estimated number of potentially affected small contractors 
includes those that strictly provide materials and supplies to the 
government and other firms with no Federal contracts covered by the 
Executive Order. These firms may accrue regulatory familiarization 
costs despite not having employees affected, although their cost will 
be minimal.\169\ However, these firms should be eliminated when we 
consider costs per establishment with affected employees. Information 
was not available to eliminate these firms from the SAM database.\170\
---------------------------------------------------------------------------

    \169\ In the proposed rule the Department said these firms may 
not incur familiarization costs. Commenters contended that these 
firms will still accrue regulatory familiarization costs because, as 
the U.S. Chamber of Commerce wrote: ``[e]ven contractors exempt from 
the proposed rule for some reason will, first, have to review the 
regulation and their own book of contracts (and prospective bids) to 
make such a determination.''
    \170\ This may also be an overestimate since some firms in the 
SAM database do not currently have contracts with the Federal 
government.
---------------------------------------------------------------------------

    Thus, the Department used data from USASpending to estimate a more 
appropriate number of small contractors with affected employees. Using 
the FY2015 USASpending database, the Department found 70,600 unique 
private small prime contracting firms.\171\ Adding in the small 
subcontractors and the small entities operating under covered contracts 
on Federal property yields an estimated 143,400 small contractors with 
active contracts in Year 1. Because this Final Rule only applies to new 
contracts, the Department divided the number of contractors by 5 to 
represent the number of contractors with new contracts in Year 1 
(28,700 firms). Lastly, the Department adjusted this estimate to 
exclude a share of potentially affected contractors who have 
potentially affected employees but no affected employees because they 
already provide the required number of days of paid sick leave.\172\ 
The ratio of affected employees to potentially affected employees in 
small businesses

[[Page 67705]]

was calculated and multiplied by the number of small contractors with 
potentially affected employees by industry to make this adjustment. 
These calculations result in an estimated 21,400 small contractors with 
affected employees in Year 1. The calculations of direct costs and 
transfers per small contractor with affected employees shown in Table 
23 include only these 21,400 small contractors.
---------------------------------------------------------------------------

    \171\ In the USASpending data, small contractors were identified 
based on the ``contractingofficerbusinesssizedetermination'' 
variable. The description of this variable in the USASpending.gov 
Data Dictionary is: ``The Contracting Officer's determination of 
whether the selected contractor meets the small business size 
standard for award to a small business for the NAICS code that is 
applicable to the contract.'' The Data Dictionary is available at: 
https://www.usaspending.gov/DownloadCenter/Documents/USAspending.govDownloadsDataDictionary.pdf.
    \172\ As discussed in the RIA, some potentially affected 
employees considered not affected in the Department's analysis may 
actually be affected due to a broader scope of uses allowed for 
taking paid sick leave. However, data are not sufficient to estimate 
the number of additional employees that will be affected due to 
this, how many additional days of paid sick leave will be taken by 
these employees, or the transfers associated with any additional 
affected employees. Thus, for the purpose of calculating average 
costs and transfers per contractor with affected employees, any 
possible additional employees affected are excluded from both the 
numerator and denominator for consistency.
---------------------------------------------------------------------------

    The number of employees in small contracting firms is unknown. The 
Department estimated the share of total Federal contracting 
expenditures in the USASpending data associated with contractors 
labeled as small, by industry. The Department then applied these shares 
to all affected employees to estimate the share of affected employees 
in small entities. However, based on 2015 NCS data, smaller firms are 
less likely to offer sick leave pay, and therefore employees in small 
contracting firms are more likely to be affected. The Department 
adjusted for this using data from the 2015 NCS on the distribution of 
employees with paid sick leave by employer size. For these purposes, 
small businesses were approximated as those having less than 500 
employees. The Department found that employees in firms with less than 
500 employees were 1.1 times more likely to not have paid sick leave 
than employees in all firms. Therefore, the Department multiplied the 
previously estimated share of affected employees working for small 
contractors (e.g., 22.3 percent in the information industry) by 1.1 to 
better estimate the percent of affected employees in small businesses 
in each industry (e.g., 24.9 percent in the information industry). The 
Department then multiplied the percent affected that are in small 
businesses by the total number of affected employees by industry, then 
summed over all industries, to find that 66,800 employees employed by 
small contractors in Year 1 would be affected by the rule.

                                              Table 21--Small Federal Contracting Firms and Their Employees
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Contractors \a\                       % of       Affected employees in
                                                                           --------------------------     % of       affected            year 1
                                                                                                      expenditure   employees  -------------------------
                           Industry                               NAICS                                 in small     in small
                                                                               Total      Small \b\   contracting  contracting     Total        Small
                                                                                                       firms \c\    firms \d\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting...................           11        8,525        4,200         82.4         92.3           58           54
Mining.......................................................           21        1,668        1,384         56.4         63.1           39           24
Utilities....................................................           22        5,641        4,569         11.9         13.3          294           39
Construction.................................................           23       61,399       52,251         55.2         61.8       20,280       12,526
Manufacturing................................................        31-33       69,513        8,332         13.2         14.8        6,372          942
Wholesale trade..............................................           42       28,626       24,009         51.5         57.6          133           77
Retail trade.................................................        44-45       17,682       11,421         29.4         32.9       16,709        5,497
Transportation and warehousing...............................        48-49       17,780       13,158         19.0         21.3       15,609        3,321
Information..................................................           51       19,511       16,443         22.3         24.9        2,587          645
Finance and insurance........................................           52        2,712        1,631          2.6          2.9        2,484           72
Real estate and rental and leasing...........................           53       20,705       15,326         28.1         31.4           95           30
Professional, scientific, and technical serv.................           54      101,538       69,335         26.1         29.2       72,713       21,254
Management of companies and enterprises......................           55          264          157          9.3         10.4            0            0
Administrative and waste services............................           56       33,374       27,598         25.4         28.4       50,648       14,377
Educational services.........................................           61       13,645        9,074         14.7         16.4        2,456          403
Health care and social assistance............................           62       27,314       12,099         16.2         18.1       19,587        3,548
Arts, entertainment, and recreation..........................           71       26,922       25,336         54.4         60.8        2,184        1,329
Accommodation and food services..............................           72       14,524       12,376         22.2         24.8        7,718        1,915
Other services...............................................           81       18,077       11,262         30.7         34.4        2,092          719
                                                              ------------------------------------------------------------------------------------------
    Total private............................................  ...........      489,419      319,962         24.7         27.7      222,059       66,772
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Source: GSA's System for Award Management (SAM) for August 2015. Companies without a primary NAICS code are distributed proportionately amongst all
  industries. All firms are assumed to be potentially affected. Includes 24,352 additional subcontractors identified in USASpending.gov from FY2011-
  FY2015 and includes 49,757 firms with operations on Federal land or property.
\b\ SAM for August 2015. Companies without a primary NAICS code are distributed proportionately amongst all industries. All small firms are assumed to
  be potentially affected. Assume all 24,352 additional subcontractors identified in USASpending.gov are small.
\c\ Source: USASpending.gov. Percentage of contracting expenditures for covered contracts in small businesses in FY2013-FY2015.
\d\ Employees in firms with less than 500 employees were 1.1 times more likely to have no paid sick leave than employees in all firms. The Department
  adjusted upward the number of affected employees by 1.1.

C. Small Entity Costs of the Final Rule

    Employers will need to keep additional records for affected 
employees. This will result in an increase in employer burden, which 
was estimated in the PRA portion (section V.I.). Note that the burdens 
reported for the PRA section of this Final Rule include the entire 
information collection and not merely the additional burden estimated 
as a result of this Final Rule.
    Small entities will also have regulatory familiarization, 
implementation, administrative, and payroll costs (i.e., transfers). 
These are discussed in section V.C. Total direct costs (i.e., excluding 
transfers) to small contractors in Year 1 were estimated to be $78.9 
million (Table 22). This is 63 percent of total direct costs in Year 1 
(compared with 30 percent of affected employees in small contracting 
firms). Calculation of these costs is discussed in the following 
paragraphs.
    Estimated regulatory familiarization costs and initial 
implementation costs in Year 1 apply to all small firms that 
potentially hold covered contracts (320,000). Regulatory 
familiarization costs were assumed to take two hours of time in Year 1, 
on average across these potentially affected contractors of all sizes. 
In the NPRM, the Department estimated one hour of time was necessary 
for this purpose, but due to comments the Department has increased this 
time estimate to two hours in the Final Rule. An hour of a human 
resource manager's time is valued at $82.17 per hour.173 174 
Initial implementation costs, the upfront cost that is thought to be 
comparable across contractors of all sizes, and thus is a fraction of 
the total implementation costs, were estimated as taking either 1

[[Page 67706]]

or 10 hours of a human resource worker's time, (depending on whether 
the contractor has a paid leave system in place), valued at $27.50 per 
hour.\175\
---------------------------------------------------------------------------

    \173\ This includes the mean base wage of $56.29 from the OES 
plus benefits paid at a rate of 46 percent of the base wage, as 
estimated from the BLS's ECEC data. OES data available at: http://www.bls.gov/oes/current/oes113121.htm.
    \174\ Time and wage estimates for small establishments are the 
same as used in the analysis for all contractors. We have not 
tailored these to small businesses due to lack of data.
    \175\ This includes the mean base wage of $18.84 from the OES 
plus benefits paid at a rate of 46 percent of the base wage, as 
estimated from the BLS's ECEC data. OES data available at: http://www.bls.gov/oes/current/oes113121.htm.
---------------------------------------------------------------------------

    In addition to upfront implementation costs, contractors with 
affected employees will experience recurring implementation costs as 
employees gradually become covered. As each employee is affected, the 
contractor will need to spend some time updating the accounting systems 
used to track paid sick leave. Therefore, implementation costs are 
modeled as a function of newly affected employees for the first five 
years.\176\ Because of this component, costs vary with contractor size. 
The Department estimated one hour of time per newly affected employee 
will be spent by a human resources worker on implementation costs. 
Contractors may also incur recurring administrative costs associated 
with maintaining records of paid sick leave and adjusting scheduling. 
In the NPRM, the Department assumed a human resource worker will spend 
an additional fifteen minutes per affected employee annually on ongoing 
administrative costs. Due to comments the Department has increased this 
time estimate to twenty minutes in the Final Rule.
---------------------------------------------------------------------------

    \176\ The Final Rule will only apply to employees on new 
contracts. The Department estimates it will take five years for all 
employees to be affected. Therefore, adjustment costs will accrue 
over the first five years.
---------------------------------------------------------------------------

    To calculate payroll costs, the Department began with total 
transfers estimated in section V.C.iii., and multiplied this by the 
ratio of affected employees in small contracting firms to all affected 
employees. This yields the share of transfers occurring in small 
Federal contracting firms, $26.1 million in Year 1 (Table 22), which is 
31 percent of total transfers for all contracting firms in Year 1. As 
noted in V.C.iii., total transfers may be an overestimate if 
contractors tend to perform work for multiple clients, rather than 
working exclusively on Federal contracts. This may be especially 
pertinent for small business since according to a report by American 
Express Open, Federal contracting comprises 19 percent of revenues for 
small contracting firms.\177\ Table 23 contains the average costs and 
transfers per small contractor with affected employees by industry (see 
VI.B. for explanation). Average Year 1 costs and transfers per small 
contractor with affected employees range from $174 to $3,391.
---------------------------------------------------------------------------

    \177\ American Express OPEN. (2013). Trends in Federal 
Contracting for Small Businesses: A Research Summary for the 
American Express OPEN for Government Contracts Program.
---------------------------------------------------------------------------

    To estimate whether these costs and transfers will have a 
substantial impact on small entities they are compared to total 
revenues for these firms. Based on Statistics of U.S. Businesses (SUSB) 
data, small Federal contractors had total annual revenues of $566.6 
billion in 2015 from all sources (Table 24).\178\ Transfers from small 
contractors and costs to small contractors in Year 1 ($105.0 million) 
are less than 0.02 percent of revenues on average and are no more than 
0.17 percent in any industry. Therefore, the Department believes this 
Final Rule will not have a significant impact on small businesses.
---------------------------------------------------------------------------

    \178\ Total revenue for small firms from 2012 SUSB; inflated to 
2015$ using the CPI-U. Revenues for small contractors calculated by 
multiplying total revenue by the ratio of number of small 
contracting firms to total number of small firms.
---------------------------------------------------------------------------

    To estimate average annualized costs to small contracting firms the 
Department projected small business costs and transfers forward 9 
years. To do this the Department calculated the ratio of affected 
employees in small contracting firms to all affected employees in Year 
1, then multiplied this ratio by the 10-year projections of national 
costs and transfers (see section V.C.). This yields the share of 
projected costs and transfers attributable to small businesses (Table 
25).

                                              Table 22--Costs and Transfers to Small Contractors in Year 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Direct employer costs ($1,000s)
                                                       -------------------------------------------------------------------------------------  Transfers
                 Industry                     NAICS        Regulatory          Initial          Recurring         Recurring                   ($1,000s)
                                                         familiarization   implementation    implementation    administrative      Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and.......           11              $690              $313                $1                $0       $1,005          $26
Mining...................................           21               227               103                 1                 0          331            2
Utilities................................           22               751               341                 1                 0        1,093           19
Construction.............................           23             8,587             3,894               344               115       12,940        5,908
Manufacturing............................        31-33             1,369               621                26                 9        2,025          378
Wholesale trade..........................           42             3,945             1,789                 2                 1        5,738           25
Retail trade.............................        44-45             1,877               851               151                50        2,930        1,273
Transportation and warehousing...........        48-49             2,162               981                91                30        3,265        1,383
Information..............................           51             2,702             1,225                18                 6        3,951          198
Finance and insurance....................           52               268               122                 2                 1          392           28
Real estate and rental and leasing.......           53             2,519             1,142                 1                 0        3,662           17
Professional, scientific, and............           54            11,394             5,167               585               195       17,341       10,678
Management of companies and..............           55                26                12                 0                 0           38            0
Administrative and waste services........           56             4,535             2,057               395               132        7,119        3,310
Educational services.....................           61             1,491               676                11                 4        2,182          171
Health care and social assistance........           62             1,988               902                98                33        3,020        1,529
Arts, entertainment, and recreation......           71             4,164             1,888                37                12        6,100          496
Accommodation and food services..........           72             2,034               922                53                18        3,026          464
Other services...........................           81             1,851               839                20                 7        2,716          211
                                          --------------------------------------------------------------------------------------------------------------
    Total private........................  ...........            52,580            23,846             1,836               612       78,874       26,116
--------------------------------------------------------------------------------------------------------------------------------------------------------


                              Table 23--Average Costs and Transfers per Small Contractor With Affected Employees in Year 1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Small
                                                              Total small      contractors         Small                                     Total costs
                                                              contractors          with         contractors         Direct       Transfers       and
                   Industry                       NAICS           with         potentially     with affected    employer costs   per small    transfers
                                                              potentially        affected       employees in      per  small     contractor   per small
                                                                affected       employees in      year 1 \c\       contractor                  contractor
                                                             employees \a\      year 1 \b\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting...           11            1,957              391              391          $161.73       $66.08      $227.81

[[Page 67707]]

 
Mining.......................................           21              184               37               28           189.18        72.85       262.03
Utilities....................................           22            2,661              532               74           176.12       254.88       431.00
Construction.................................           23           17,899            3,580            3,368           293.08     1,754.34     2,047.42
Manufacturing................................        31-33           10,941            2,188            1,784           176.05       211.87       387.91
Wholesale trade..............................           42            1,484              297              230           168.89       109.97       278.85
Retail trade.................................        44-45            5,578            1,116              857           391.94     1,485.43     1,877.37
Transportation and warehousing...............        48-49            7,931            1,586              925           288.37     1,495.84     1,784.21
Information..................................           51            8,293            1,659              701           190.45       282.19       472.64
Finance and insurance........................           52              198               40               12           383.26     2,440.85     2,824.12
Real estate and rental and leasing...........           53            2,326              465              328           160.04        52.86       212.91
Professional, scientific, and technical                 54           26,396            5,279            3,542           376.70     3,014.52     3,391.22
 services....................................
Management of companies and enterprises......           55                2                0                0           158.77        15.31       174.08
Administrative and waste services............           56           13,533            2,707            2,390           377.26     1,384.81     1,762.07
Educational services.........................           61            3,140              628              230           220.97       742.28       963.25
Health care and social assistance............           62            4,916              983              581           380.47     2,629.11     3,009.58
Arts, entertainment, and recreation..........           71           23,191            4,638            3,665           169.99       135.36       305.34
Accommodation and food services..............           72            7,715            1,543            1,503           203.41       308.64       512.06
Other services...............................           81            5,007            1,001              774           190.72       272.77       463.49
------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------------------
\a\ Source: USASpending.gov FY2015. Firms with contracting revenue, excluding contracts only for goods. Also includes 24,352 additional subcontractors
  identified in USASpending.gov from FY2011-FY2015 and 48,400 firms with operations on Federal land or property.
\b\ Estimated as 20 percent of contractors with revenue from service contracts in FY2015. If affected employees in Year 1 are spread over more than 20
  percent of these contractors, average costs and transfers per small contractor in Year 1 would be lower.
\c\ Calculated by multiplying the number of small contractors with potentially affected employees in Year 1 by percentage of potentially affected
  workers who are affected, by industry. This may be an underestimate of the number of small contractors with affected employees if contractors have
  some potentially affected employees who are affected and others who are not affected.


             Table 24--Costs and Transfers as Share of Revenue in Small Contracting Firms in Year 1
----------------------------------------------------------------------------------------------------------------
                                                                       Total           Small
                                                                    transfers &     contracting   Total as share
                    Industry                           NAICS           costs       firm revenues    of revenues
                                                                     ($1,000s)    (billions) \a\        (%)
----------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting......              11          $1,031            $4.2           0.025
Mining..........................................              21             333             7.7           0.004
Utilities.......................................              22           1,112            80.6           0.001
Construction....................................              23          18,848            58.1           0.032
Manufacturing...................................           31-33           2,403            40.7           0.006
Wholesale trade.................................              42           5,763           159.6           0.004
Retail trade....................................           44-45           4,202            22.6           0.019
Transportation and warehousing..................           48-49           4,648            17.6           0.026
Information.....................................              51           4,149            41.8           0.010
Finance and insurance...........................              52             421             1.8           0.024
Real estate and rental and leasing..............              53           3,679            10.6           0.035
Professional, scientific, and technical services              54          28,019            53.5           0.052
Management of companies and enterprises.........              55              38             0.0           0.162
Administrative and waste services...............              56          10,429            20.9           0.050
Educational services............................              61           2,353             8.2           0.029
Health care and social assistance...............              62           4,549            11.2           0.041
Arts, entertainment, and recreation.............              71           6,597            19.5           0.034
Accommodation and food services.................              72           3,490             2.2           0.161
Other services..................................              81           2,928             5.9           0.050
                                                 ---------------------------------------------------------------
    Total private...............................  ..............         104,990           566.6           0.019
----------------------------------------------------------------------------------------------------------------
\a\ Source: Total revenue for small firms from 2012 SUSB; inflated to 2015$ using the CPI-U. Adjusted with ratio
  of small contracting firms to all small firms.


                                  Table 25--Projected Costs to Small Businesses
                                               [Millions of 2015$]
----------------------------------------------------------------------------------------------------------------
                                                                      Direct
                       Year/discount rate                         employer costs     Transfers         Total
----------------------------------------------------------------------------------------------------------------
                                               Years 1 Through 10
----------------------------------------------------------------------------------------------------------------
Year 1..........................................................           $78.9           $26.1          $105.0
Year 2..........................................................             3.2            53.8            57.0

[[Page 67708]]

 
Year 3..........................................................             3.8            81.9            85.8
Year 4..........................................................             4.5           110.5           114.9
Year 5..........................................................             5.1           139.5           144.6
Year 6..........................................................             3.2           141.8           145.0
Year 7..........................................................             3.2           144.2           147.5
Year 8..........................................................             3.3           146.7           149.9
Year 9..........................................................             3.3           149.2           152.5
Year 10.........................................................             3.3           151.7           155.0
----------------------------------------------------------------------------------------------------------------
                                           Average Annualized Amounts
----------------------------------------------------------------------------------------------------------------
3% discount rate................................................            12.2           111.2           123.4
7% discount rate................................................            13.7           106.8           120.5
----------------------------------------------------------------------------------------------------------------

D. Differing Compliance and Reporting Requirements for Small Entities

    This Final Rule provides no differing compliance and reporting 
requirements for small entities.

E. Least Burdensome Option or Explanation Required

    The Department believes it has chosen the most effective option 
that implements the Executive Order, and limits burdens to the extent 
reasonably possible given the requirements of the Executive Order. 
Taking no regulatory action does not address the Department's concerns 
discussed above (see Need for Regulation section) and would contravene 
the Executive Order. The Department also found the option to allow 
unlimited accrual (section V.C.vi.) to be overly burdensome on business 
as well as beyond the scope of the Executive Order.
    Pursuant to section 603(c) of the RFA, the following alternatives 
are to be addressed:
    i. Differing compliance or reporting requirements for small 
entities. To establish differing compliance or reporting requirements 
for small businesses would undermine the impact of the rule. The 
Department makes available a variety of resources to employers for 
understanding their obligations and achieving compliance. Therefore, 
the Department is not implementing differing compliance or reporting 
requirements for small businesses.
    ii. The clarification, consolidation, or simplification of 
compliance and reporting requirements for small entities. The 
Department makes available a variety of resources to employers for 
understanding their obligations and achieving compliance. As such, the 
Department has not clarified, consolidated, or simplified the rule.
    iii. The use of performance rather than design standards. The 
Department makes available a variety of resources to employers for 
understanding their obligations and achieving compliance. Therefore, 
the Department is not relying upon performance to determine compliancy.
    iv. An exemption from coverage of the rule, or any part thereof, 
for such small entities. To exempt small businesses from the Final Rule 
would undermine the impact of the rule. The Department makes available 
a variety of resources to employers for understanding their obligations 
and achieving compliance. Therefore, the Department is not implementing 
a ``small business'' exemption.

F. Identification, to the Extent Practicable, of all Relevant Federal 
Rules That May Duplicate, Overlap, or Conflict With the Final Rule

    The Department is not aware of any Federal rules that duplicate, 
overlap, or conflict with this Final Rule.

VI. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1532, 
requires that agencies prepare a written statement, which includes an 
assessment of anticipated costs and benefits, before proposing any 
Federal mandate that may result in excess of $100 million (adjusted 
annually for inflation) in expenditures in any one year by state, 
local, and tribal governments in the aggregate, or by the private 
sector. However, this rulemaking applies almost entirely to private 
employees on Federal contracts and is not expected to affect state, 
local, or tribal governments. Please see section V.C. for an assessment 
of anticipated costs and benefits to the private sector.
    A few commenters discussed the cost of the proposed rule to tribes. 
Elk Valley Rancheria wrote that they have ``limited staff available to 
perform both direct and indirect services for federal contracts. . . 
The recordkeeping requirements, ambiguity in covered contracts, limited 
budgets of federal agencies, and potential penalties that could be 
imposed upon the Tribe as a federal contractor could result in the 
Tribe having to forego important federal contracting opportunities to 
the detriment of both the Tribe and federal agencies such as the 
Federal Highway Administration and the National Park Service.'' The 
Chamber/IFA believes some costs may be passed on to state, local and 
tribal governments and believes ``the Department neglected to identify 
the various parties or types of contracts that would be implicated. The 
Department has therefore not addressed these important issues in its 
Unfunded Mandates Reform Act analysis.'' The Department believes that 
because costs are a small share of revenues, impacts to governments and 
tribes should be small.

VII. Executive Order 13132, Federalism

    The Department has (1) reviewed this rule in accordance with 
Executive Order 13132 regarding federalism and (2) determined that it 
does not have federalism implications. The Final Rule will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government.

[[Page 67709]]

VIII. Executive Order 13175, Indian Tribal Governments

    This Final Rule will not have tribal implications under Executive 
Order 13175 that would require a tribal summary impact statement. The 
rule will not have substantial direct effects on one or more Indian 
tribes, on the relationship between the Federal government and Indian 
tribes, or on the distribution of power and responsibilities between 
the Federal government and Indian tribes.

IX. Effects on Families

    The undersigned hereby certifies that the Final Rule will not 
adversely affect the well-being of families, as discussed under section 
654 of the Treasury and General Government Appropriations Act, 1999.

X. Executive Order 13045, Protection of Children

    This Final Rule will have no environmental health risk or safety 
risk that may disproportionately affect children.

XI. Environmental Impact Assessment

    A review of this Final Rule in accordance with the requirements of 
the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et 
seq.; the regulations of the Council on Environmental Quality, 40 CFR 
1500 et seq.; and the Departmental NEPA procedures, 29 CFR part 11, 
indicates that the rule will not have a significant impact on the 
quality of the human environment. There is, thus, no corresponding 
environmental assessment or an environmental impact statement.

XII. Executive Order 13211, Energy Supply

    This rule is not subject to Executive Order 13211. It will not have 
a significant adverse effect on the supply, distribution, or use of 
energy.

XIII. Executive Order 12630, Constitutionally Protected Property Rights

    This Final Rule is not subject to Executive Order 12630 because it 
does not involve implementation of a policy that has takings 
implications or that could impose limitations on private property use.

XIV. Executive Order 12988, Civil Justice Reform Analysis

    This Final Rule was drafted and reviewed in accordance with 
Executive Order 12988 and will not unduly burden the Federal court 
system. The rule was: (1) Reviewed to eliminate drafting errors and 
ambiguities; (2) written to minimize litigation; and (3) written to 
provide a clear legal standard for affected conduct and to promote 
burden reduction.

List of Subjects in 29 CFR Part 13

    Administrative practice and procedure, Construction, Government 
contracts, Law enforcement, Paid sick leave, Reporting and 
recordkeeping requirements.

David Weil,
Administrator, Wage and Hour Division.

0
For the reasons set out in the preamble, the Department of Labor amends 
Title 29 of the Code of Federal Regulations by adding part 13 to read 
as follows:

PART 13--ESTABLISHING PAID SICK LEAVE FOR FEDERAL CONTRACTORS

Subpart A--General
Sec.
13.1 Purpose and scope.
13.2 Definitions.
13.3 Coverage.
13.4 Exclusions.
13.5 Paid sick leave for Federal contractors and subcontractors.
13.6 Prohibited acts.
13.7 Waiver of rights.
13.8 Multiemployer plans or other funds, plans, or programs.
Subpart B--Federal Government Requirements
13.11 Contracting agency requirements.
13.12 Department of Labor requirements.
Subpart C--Contractor Requirements
13.21 Contract clause.
13.22 Paid sick leave.
13.23 Deductions.
13.24 Anti-kickback.
13.25 Records to be kept by contractors.
13.26 Notice.
13.27 Timing of pay.
Subpart D--Enforcement
13.41 Complaints.
13.42 Wage and Hour Division conciliation.
13.43 Wage and Hour Division investigation.
13.44 Remedies and sanctions.
Subpart E--Administrative Proceedings
13.51 Disputes concerning contractor compliance.
13.52 Debarment proceedings.
13.53 Referral to Chief Administrative Law Judge; amendment of 
pleadings.
13.54 Consent findings and order.
13.55 Administrative Law Judge proceedings.
13.56 Petition for review.
13.57 Administrative Review Board proceedings.
13.58 Administrator ruling.
Appendix A to Part 13--Contract Clause

    Authority: 5 U.S.C. 301; E.O. 13706, 80 FR 54697, 3 CFR, 2016 
Comp., p. 367; Secretary's Order 01-2014, 79 FR 77527.

Subpart A--General


Sec.  13.1  Purpose and scope.

    (a) Purpose. This part contains the Department of Labor's rules 
relating to the administration and enforcement of Executive Order 13706 
(Executive Order or the Order), ``Establishing Paid Sick Leave for 
Federal Contractors.'' The Order states that providing paid sick leave 
to employees will improve the health and performance of employees of 
Federal contractors and will bring benefits packages offered by Federal 
contractors in line with model employers, ensuring they remain 
competitive in the search for dedicated and talented employees. The 
Executive Order concludes that providing paid sick leave will result in 
savings and quality improvements in the work performed by parties who 
contract with the Federal Government that will in turn lead to improved 
economy and efficiency in Government procurement.
    (b) Policy. Executive Order 13706 sets forth the general position 
of the Federal Government that providing access to paid sick leave on 
Federal contracts will increase efficiency and cost savings for the 
Federal Government. The Order therefore provides that executive 
departments and agencies shall, to the extent permitted by law, ensure 
that new covered contracts, contract-like instruments, and 
solicitations (collectively referred to as ``contracts'') include a 
clause, which the contractor and any subcontractors shall incorporate 
into lower-tier subcontracts, specifying, as a condition of payment, 
that employees will earn not less than 1 hour of paid sick leave for 
every 30 hours worked on or in connection with covered contracts.
    (c) Scope. Neither Executive Order 13706 nor this part creates or 
changes any rights under the Contract Disputes Act or creates any 
private right of action. The Executive Order provides that disputes 
regarding whether a contractor has provided paid sick leave as 
prescribed by the Order, to the extent permitted by law, shall be 
disposed of only as provided in this part. However, nothing in the 
Order or this part is intended to limit or preclude a civil action 
under the False Claims Act, 31 U.S.C. 3730, or criminal prosecution 
under 18 U.S.C. 1001. The Order and this part similarly do not preclude 
judicial review of final decisions by the Secretary of Labor in 
accordance with the Administrative Procedure Act, 5 U.S.C. 701 et seq.

[[Page 67710]]

Sec.  13.2  Definitions.

    For purposes of this part:
    Accrual year means the 12-month period during which a contractor 
may limit an employee's accrual of paid sick leave to no less than 56 
hours.
    Administrative Review Board (ARB or Board) means the Administrative 
Review Board, U.S. Department of Labor.
    Administrator means the Administrator of the Wage and Hour Division 
and includes any official of the Wage and Hour Division authorized to 
perform any of the functions of the Administrator under this part.
    As soon as is practicable means as soon as both possible and 
practical, taking into account all of the facts and circumstances of 
the individual case.
    Certification issued by a health care provider means any type of 
written document created or signed by a health care provider (or by a 
representative of the health care provider) that contains information 
verifying that the physical or mental illness, injury, medical 
condition, or need for diagnosis, care, or preventive care or other 
need for care referred to in Sec.  13.5(c)(1)(i), (ii), or (iii) 
exists. The health care provider (or representative) need not have seen 
the employee or the individual for whom the employee is caring in 
person to create a valid certification.
    Child means:
    (1) A biological, adopted, step, or foster son or daughter of the 
employee;
    (2) A person who is a legal ward or was a legal ward of the 
employee when that individual was a minor or required a legal guardian;
    (3) A person for whom the employee stands in loco parentis or stood 
in loco parentis when that individual was a minor or required someone 
to stand in loco parentis; or
    (4) A child, as described in paragraphs (1) through (3) of this 
definition, of an employee's spouse or domestic partner.
    Concessions contract or contract for concessions means a contract 
under which the Federal Government grants a right to use Federal 
property, including land or facilities, for furnishing services. The 
term concessions contract includes, but is not limited to, a contract 
the principal purpose of which is to furnish food, lodging, automobile 
fuel, souvenirs, newspaper stands, and/or recreational equipment, 
regardless of whether the services are of direct benefit to the 
Government, its personnel, or the general public.
    Contract or contract-like instrument means an agreement between two 
or more parties creating obligations that are enforceable or otherwise 
recognizable at law. This definition includes, but is not limited to, a 
mutually binding legal relationship obligating one party to furnish 
services (including construction) and another party to pay for them. 
The term contract includes all contracts and any subcontracts of any 
tier thereunder, whether negotiated or advertised, including any 
procurement actions, lease agreements, cooperative agreements, provider 
agreements, intergovernmental service agreements, service agreements, 
licenses, permits, or any other type of agreement, regardless of 
nomenclature, type, or particular form, and whether entered into 
verbally or in writing. The term contract shall be interpreted broadly 
to include, but not be limited to, any contract that may be consistent 
with the definition provided in the Federal Acquisition Regulation 
(FAR) or applicable Federal statutes. This definition includes, but is 
not limited to, any contract that may be covered under any Federal 
procurement statute. Contracts may be the result of competitive bidding 
or awarded to a single source under applicable authority to do so. In 
addition to bilateral instruments, contracts include, but are not 
limited to, awards and notices of awards; job orders or task letters 
issued under basic ordering agreements; letter contracts; orders, such 
as purchase orders, under which the contract becomes effective by 
written acceptance or performance; and bilateral contract 
modifications. The term contract includes contracts covered by the 
Service Contract Act, contracts covered by the Davis-Bacon Act, 
concessions contracts not subject to the Service Contract Act, and 
contracts in connection with Federal property or land and related to 
offering services for Federal employees, their dependents, or the 
general public.
    Contracting officer means a representative of an executive 
department or agency with the authority to enter into, administer, and/
or terminate contracts and make related determinations and findings. 
This term includes certain authorized representatives of the 
contracting officer acting within the limits of their authority as 
delegated by the contracting officer.
    Contractor means any individual or other legal entity that is 
awarded a Federal Government contract or subcontract under a Federal 
Government contract. The term contractor refers to both a prime 
contractor and all of its subcontractors of any tier on a contract with 
the Federal Government. The term contractor includes lessors and 
lessees. The term employer is used interchangeably with the terms 
contractor and subcontractor in various sections of this part. The U.S. 
Government, its agencies, and instrumentalities are not contractors, 
subcontractors, employers, or joint employers for purposes of 
compliance with the provisions of the Executive Order.
    Davis-Bacon Act (DBA) means the Davis-Bacon Act of 1931, as 
amended, 40 U.S.C. 3141 et seq., and its implementing regulations.
    Domestic partner means an adult in a committed relationship with 
another adult. A committed relationship is one in which the employee 
and the domestic partner of the employee are each other's sole domestic 
partner (and are not married to or domestic partners with anyone else) 
and share responsibility for a significant measure of each other's 
common welfare and financial obligations. This includes, but is not 
limited to, any relationship between two individuals of the same or 
opposite sex that is granted legal recognition by a State or by the 
District of Columbia as a marriage or analogous relationship 
(including, but not limited to, a civil union).
    Domestic violence means:
    (1) Felony or misdemeanor crimes of violence (including threats or 
attempts) committed:
    (i) By a current or former spouse, domestic partner, or intimate 
partner of the victim;
    (ii) By a person with whom the victim shares a child in common;
    (iii) By a person who is cohabitating with or has cohabitated with 
the victim as a spouse, domestic partner, or intimate partner;
    (iv) By a person similarly situated to a spouse of the victim under 
civil or criminal domestic or family violence laws of the jurisdiction 
in which the victim resides or the events occurred; or
    (v) By any other adult person against a victim who is protected 
from that person's acts under the civil or criminal domestic or family 
violence laws of the jurisdiction in which the victim resides or the 
events occurred.
    (2) Domestic violence also includes any crime of violence 
considered to be an act of domestic violence under the civil or 
criminal domestic or family violence laws of the jurisdiction in which 
the victim resides or the events occurred.
    Employee means any person engaged in performing work on or in 
connection with a contract covered by the Executive Order, and whose 
wages under such contract are governed by the Service Contract Act, the 
Davis-Bacon Act, or

[[Page 67711]]

the Fair Labor Standards Act, including employees who qualify for an 
exemption from the Fair Labor Standards Act's minimum wage and overtime 
provisions, regardless of the contractual relationship alleged to exist 
between the individual and the employer. The term employee includes any 
person performing work on or in connection with a covered contract and 
individually registered in a bona fide apprenticeship or training 
program registered with the U.S. Department of Labor's Employment and 
Training Administration, Office of Apprenticeship, or with a State 
Apprenticeship Agency recognized by the Office of Apprenticeship. An 
employee performs ``on'' a contract if the employee directly performs 
the specific services called for by the contract. An employee performs 
``in connection with'' a contract if the employee's work activities are 
necessary to the performance of a contract but are not the specific 
services called for by the contract.
    Executive departments and agencies means executive departments 
within the meaning of 5 U.S.C. 101, military departments within the 
meaning of 5 U.S.C. 102, or any independent establishments within the 
meaning of 5 U.S.C. 104(1) or 39 U.S.C. 201, and any wholly owned 
Government corporation within the meaning of 31 U.S.C. 9101.
    Executive Order 13495 or Nondisplacement Executive Order means 
Executive Order 13495 of January 30, 2009, Nondisplacement of Qualified 
Workers Under Service Contracts, 74 FR 6103 (Feb. 4, 2009), and its 
implementing regulations at 29 CFR part 9.
    Executive Order 13658 or Minimum Wage Executive Order means 
Executive Order 13658 of February 12, 2014, Establishing a Minimum Wage 
for Contractors, 79 FR 9851 (Feb. 20, 2014), and its implementing 
regulations at 29 CFR part 10.
    Fair Labor Standards Act (FLSA) means the Fair Labor Standards Act 
of 1938, as amended, 29 U.S.C. 201 et seq., and its implementing 
regulations.
    Family and Medical Leave Act (FMLA) means the Family and Medical 
Leave Act of 1993, as amended, 29 U.S.C. 2601 et seq., and its 
implementing regulations.
    Family violence means any act or threatened act of violence, 
including any forceful detention of an individual that results or 
threatens to result in physical injury and is committed by a person 
against another individual (including an elderly individual) to or with 
whom such person is related by blood, is or was related by marriage or 
is or was otherwise legally related, or is or was lawfully residing.
    Federal Government means an agency or instrumentality of the United 
States that enters into a contract pursuant to authority derived from 
the Constitution or the laws of the United States. For purposes of the 
Executive Order and this part, this definition does not include the 
District of Columbia, any Territory or possession of the United States, 
or any independent regulatory agency within the meaning of 44 U.S.C. 
3502(5).
    Health care provider means any practitioner who is licensed or 
certified under Federal or State law to provide the health-related 
service in question or any practitioner recognized by an employer or 
the employer's group health plan. The term includes, but is not limited 
to, doctors of medicine or osteopathy, podiatrists, dentists, 
psychologists, optometrists, chiropractors, nurse practitioners, nurse-
midwives, clinical social workers, physician assistants, physical 
therapists, and Christian Science Practitioners listed with the First 
Church of Christ, Scientist in Boston, Massachusetts.
    Independent agencies means independent regulatory agencies within 
the meaning of 44 U.S.C. 3502(5).
    Individual related by blood or affinity whose close association 
with the employee is the equivalent of a family relationship means any 
person with whom the employee has a significant personal bond that is 
or is like a family relationship, regardless of biological or legal 
relationship.
    Intimate partner means a person who is or has been in a social 
relationship of a romantic or intimate nature with the victim, where 
the existence of such a relationship shall be determined based on a 
consideration of the length of the relationship; the type of 
relationship; and the frequency of interaction between the persons 
involved in the relationship.
    Multiemployer plan means a plan to which more than one employer is 
required to contribute and which is maintained pursuant to one or more 
collective bargaining agreements between one or more employee 
organizations and more than one employer.
    New contract means a contract that results from a solicitation 
issued on or after January 1, 2017, or a contract that is awarded 
outside the solicitation process on or after January 1, 2017. This term 
includes both new contracts and replacements for expiring contracts. It 
does not apply to the unilateral exercise of a pre-negotiated option to 
renew an existing contract by the Federal Government. For purposes of 
the Executive Order, a contract that is entered into prior to January 
1, 2017 will constitute a new contract if, through bilateral 
negotiation, on or after January 1, 2017:
    (1) The contract is renewed;
    (2) The contract is extended, unless the extension is made pursuant 
to a term in the contract as of December 31, 2016 providing for a 
short-term limited extension; or
    (3) The contract is amended pursuant to a modification that is 
outside the scope of the contract.
    Obtain additional counseling, seek relocation, seek assistance from 
a victim services organization, or take related legal action, used in 
reference to domestic violence, sexual assault, or stalking, means to 
spend time arranging, preparing for, or executing acts related to 
addressing physical injuries or mental or emotional impacts resulting 
from being a victim of domestic violence, sexual assault, or stalking. 
Such acts include finding and using services of a counselor or victim 
services organization intended to assist a victim to respond to or 
prevent future incidents of domestic violence, sexual assault, or 
stalking; identifying and moving to a different residence to avoid 
being a victim of domestic violence, sexual assault, or stalking; or a 
victim's pursuing any related legal action.
    Obtaining diagnosis, care, or preventive care from a health care 
provider means receiving services from a health care provider, whether 
to identify, treat, or otherwise address an existing condition or to 
prevent potential conditions from arising. The term includes time spent 
traveling to and from the location at which such services are provided 
or recovering from receiving such services.
    Office of Administrative Law Judges means the Office of 
Administrative Law Judges, U.S. Department of Labor.
    Option means a unilateral right in a contract by which, for a 
specified time, the Government may elect to purchase additional 
supplies or services called for by the contract, or may elect to extend 
the term of the contract.
    Paid sick leave means compensated absence from employment that is 
required by Executive Order 13706 and this part.
    Parent means:
    (1) A biological, adoptive, step, or foster parent of the employee, 
or a person who was a foster parent of the employee when the employee 
was a minor;
    (2) A person who is the legal guardian of the employee or was the 
legal guardian of the employee when the

[[Page 67712]]

employee was a minor or required a legal guardian;
    (3) A person who stands in loco parentis to the employee or stood 
in loco parentis to the employee when the employee was a minor or 
required someone to stand in loco parentis; or
    (4) A parent, as described in paragraphs (1) through (3) of this 
definition, of an employee's spouse or domestic partner.
    Physical or mental illness, injury, or medical condition means any 
disease, sickness, disorder, or impairment of, or any trauma to, the 
body or mind.
    Procurement contract for construction means a procurement contract 
for the construction, alteration, or repair (including painting and 
decorating) of public buildings or public works and which requires or 
involves the employment of mechanics or laborers, and any subcontract 
of any tier thereunder. The term procurement contract for construction 
includes any contract subject to the Davis-Bacon Act.
    Procurement contract for services means a contract the principal 
purpose of which is to furnish services in the United States through 
the use of service employees, and any subcontract of any tier 
thereunder. The term procurement contract for services includes any 
contract subject to the Service Contract Act.
    Related legal action or related civil or criminal legal proceeding, 
used in reference to domestic violence, sexual assault, or stalking, 
means any type of legal action, in any forum, that relates to the 
domestic violence, sexual assault, or stalking, including, but not 
limited to, family, tribal, territorial, immigration, employment, 
administrative agency, housing matters, campus administrative or 
protection or stay-away order proceedings, and other similar matters; 
and criminal justice investigations, prosecutions, and post-trial 
matters (including sentencing, parole, and probation) that impact the 
victim's safety and privacy.
    Secretary means the Secretary of Labor and includes any official of 
the U.S. Department of Labor authorized to perform any of the functions 
of the Secretary of Labor under this part.
    Service Contract Act (SCA) means the McNamara-O'Hara Service 
Contract Act of 1965, as amended, 41 U.S.C. 6701 et seq., and its 
implementing regulations.
    Sexual assault means any nonconsensual sexual act proscribed by 
Federal, tribal, or State law, including when the victim lacks capacity 
to consent.
    Solicitation means any request to submit offers, bids, or 
quotations to the Federal Government.
    Spouse means the other person with whom an individual entered into 
marriage as defined or recognized under State law for purposes of 
marriage in the State in which the marriage was entered into or, in the 
case of a marriage entered into outside of any State, if the marriage 
is valid in the place where entered into and could have been entered 
into in at least one State. This definition includes an individual in a 
common law marriage that was entered into in a State that recognizes 
such marriages or, if entered into outside of any State, is valid in 
the place where entered into and could have been entered into in at 
least one State.
    Stalking means engaging in a course of conduct directed at a 
specific person that would cause a reasonable person to fear for his or 
her safety or the safety of others or suffer substantial emotional 
distress.
    United States means the United States and all executive 
departments, independent establishments, administrative agencies, and 
instrumentalities of the United States, including corporations of which 
all or substantially all of the stock is owned by the United States, by 
the foregoing departments, establishments, agencies, and 
instrumentalities, including nonappropriated fund instrumentalities. 
When used in a geographic sense, the United States means the 50 States 
and the District of Columbia.
    Victim services organization means a nonprofit, nongovernmental, or 
tribal organization or rape crisis center, including a State or tribal 
coalition, that assists or advocates for victims of domestic violence, 
sexual assault, or stalking, including domestic violence shelters, 
faith-based organizations, and other organizations, with a documented 
history of effective work concerning domestic violence, sexual assault, 
or stalking.
    Violence Against Women Act (VAWA) means the Violence Against Women 
Act of 1994, 42 U.S.C. 13925 et seq., and its implementing regulations.
    Wage and Hour Division means the Wage and Hour Division, U.S. 
Department of Labor.


Sec.  13.3  Coverage.

    (a) This part applies to any new contract with the Federal 
Government, unless excluded by Sec.  13.4, provided that:
    (1)(i) It is a procurement contract for construction covered by the 
Davis-Bacon Act;
    (ii) It is a contract for services covered by the Service Contract 
Act;
    (iii) It is a contract for concessions, including any concessions 
contract excluded from coverage under the Service Contract Act by 
Department of Labor regulations at Sec.  4.133(b); or
    (iv) It is a contract in connection with Federal property or lands 
and related to offering services for Federal employees, their 
dependents, or the general public; and
    (2) The wages of employees performing on or in connection with such 
contract are governed by the Davis-Bacon Act, the Service Contract Act, 
or the Fair Labor Standards Act, including employees who qualify for an 
exemption from the Fair Labor Standards Act's minimum wage and overtime 
provisions.
    (b) For contracts covered by the Service Contract Act or the Davis-
Bacon Act, this part applies to prime contracts only at the thresholds 
specified in those statutes. For procurement contracts where employees' 
wages are governed by the Fair Labor Standards Act, this part applies 
when the prime contract exceeds the micro-purchase threshold, as 
defined in 41 U.S.C. 1902(a). For all other prime contracts covered by 
Executive Order 13706 and this part and for all subcontracts awarded 
under prime contracts covered by Executive Order 13706 and this part, 
this part applies regardless of the value of the contract.
    (c) This part only applies to contracts with the Federal Government 
requiring performance in whole or in part within the United States. If 
a contract with the Federal Government is to be performed in part 
within and in part outside the United States and is otherwise covered 
by the Executive Order and this part, the requirements of the Order and 
this part would apply with respect to that part of the contract that is 
performed within the United States.
    (d) This part does not apply to contracts for the manufacturing or 
furnishing of materials, supplies, articles, or equipment to the 
Federal Government, including those that are subject to the Walsh-
Healey Public Contracts Act, 41 U.S.C. 6501 et seq.


Sec.  13.4  Exclusions.

    (a) Grants. The requirements of this part do not apply to grants 
within the meaning of the Federal Grant and Cooperative Agreement Act, 
as amended, 31 U.S.C. 6301 et seq.
    (b) Contracts and agreements with and grants to Indian Tribes. This 
part does not apply to contracts and agreements with and grants to 
Indian Tribes under the Indian Self-Determination and Education 
Assistance Act, as amended, 25 U.S.C. 450 et seq.

[[Page 67713]]

    (c) Procurement contracts for construction that are excluded from 
coverage of the Davis-Bacon Act. Procurement contracts for construction 
that are not covered by the Davis-Bacon Act are not subject to this 
part.
    (d) Contracts for services that are exempted from coverage under 
the Service Contract Act. Service contracts, except for those expressly 
covered by Sec.  13.3(a)(1)(iii) or (iv), that are exempt from coverage 
of the Service Contract Act pursuant to its statutory language at 41 
U.S.C. 6702(b) or its implementing regulations, including those at 
Sec.  4.115 through 4.122 and Sec.  4.123(d) and (e), are not subject 
to this part.
    (e) Employees performing in connection with covered contracts for 
less than 20 percent of their work hours in a given workweek. The 
accrual requirements of this part do not apply to employees performing 
in connection with covered contracts, i.e., those employees who perform 
work duties necessary to the performance of the contract but who are 
not directly engaged in performing the specific work called for by the 
contract, who spend less than 20 percent of their hours worked in a 
particular workweek performing in connection with such contracts. This 
exclusion is inapplicable to employees performing on covered contracts, 
i.e., those employees directly engaged in performing the specific work 
called for by the contract, at any point during the workweek. This 
exclusion is also inapplicable to employees performing in connection 
with covered contracts with respect to any workweek in which the 
employees spend 20 percent or more of their hours worked performing in 
connection with a covered contract.
    (f) Employees whose covered work is governed by a collective 
bargaining agreement that already provides 56 hours of paid sick time. 
If a collective bargaining agreement ratified before September 30, 2016 
applies to an employee's work performed on or in connection with a 
covered contract and provides the employee with at least 56 hours (or 7 
days, if the agreement refers to days rather than hours) of paid sick 
time (or paid time off that may be used for reasons related to sickness 
or health care) each year, the requirements of the Executive Order and 
this part do not apply to the employee until the earlier of the date 
the agreement terminates or January 1, 2020. If a collective bargaining 
agreement ratified before September 30, 2016 applies to an employee's 
work performed on or in connection with a covered contract and provides 
the employee with paid sick time (or paid time off that may be used for 
reasons related to sickness or health care) each year, but the amount 
of such leave provided under the agreement is less than 56 hours (or 7 
days, if the agreement refers to days rather than hours), the 
requirements of the Executive Order and this part do not apply to the 
employee until the earlier of the date the agreement terminates or 
January 1, 2020, provided that each year the contractor provides 
covered employees with the difference between 56 hours (or 7 days) and 
the amount provided under the existing agreement in a manner consistent 
with either the Executive Order and this part or the terms and 
conditions of the collective bargaining agreement.


Sec.  13.5  Paid sick leave for Federal contractors and subcontractors.

    (a) Accrual. (1) A contractor shall permit an employee to accrue 
not less than 1 hour of paid sick leave for every 30 hours worked on or 
in connection with a covered contract. A contractor shall aggregate an 
employee's hours worked on or in connection with all covered contracts 
for that contractor for purposes of paid sick leave accrual.
    (i) Hours worked has the same meaning for purposes of Executive 
Order 13706 and this part as it does under the Fair Labor Standards 
Act, as set forth in 29 CFR part 785. To properly exclude time spent on 
non-covered work from an employee's hours worked that count toward the 
accrual of paid sick leave, a contractor must accurately identify in 
its records the employee's covered and non-covered hours worked, or, if 
the employee performs work in connection with rather than on covered 
contracts, a contractor may estimate the portion of an employee's hours 
worked spent in connection with covered contracts provided the estimate 
is reasonable and based on verifiable information.
    (ii) A contractor shall calculate an employee's accrual of paid 
sick leave no less frequently than at the conclusion of each pay period 
or each month, whichever interval is shorter. A contractor need not 
allow an employee to accrue paid sick leave in increments smaller than 
1 hour for completion of any fraction of 30 hours worked. Any such 
fraction of hours worked shall be added to hours worked for the same 
contractor in subsequent pay periods to reach the next 30 hours worked 
provided that the next pay period in which the employee performs on or 
in connection with a covered contract occurs within the same accrual 
year.
    (iii) If a contractor is not obligated by the Service Contract Act, 
Davis-Bacon Act, or Fair Labor Standards Act to keep records of an 
employee's hours worked, such as because the employee is employed in a 
bona fide executive, administrative, or professional capacity as those 
terms are defined in 29 CFR part 541, the contractor may, as to that 
employee, calculate paid sick leave accrual by tracking the employee's 
actual hours worked or by using the assumption that the employee works 
40 hours on or in connection with a covered contract in each workweek. 
If such an employee regularly works fewer than 40 hours per week on or 
in connection with covered contracts, whether because the employee's 
time is split between covered and non-covered contracts or because the 
employee has a part-time schedule, the contractor may allow the 
employee to accrue paid sick leave based on the employee's typical 
number of hours worked on or in connection with covered contracts per 
workweek provided the contractor has probative evidence to support the 
number it uses or, if the employee performs work in connection with 
rather than on covered contracts, a contractor may estimate the 
employee's typical number of hours worked in connection with covered 
contracts per workweek provided the estimate is reasonable and based on 
verifiable information.
    (2) A contractor shall inform an employee, in writing, of the 
amount of paid sick leave that the employee has accrued but not used no 
less than once each pay period or each month, whichever interval is 
shorter, as well as upon a separation from employment and upon 
reinstatement of paid sick leave pursuant to paragraph (b)(4) of this 
section. A contractor's existing procedure for informing employees of 
their available leave, such as notification accompanying each paycheck 
or an online system an employee can check at any time, may be used to 
satisfy or partially satisfy these requirements provided it is written 
(including electronically, if the contractor customarily corresponds 
with or makes information available to its employees by electronic 
means).
    (3) A contractor may choose to provide an employee with at least 56 
hours of paid sick leave at the beginning of each accrual year rather 
than allowing the employee to accrue such leave based on hours worked 
over time.
    (i) If a contractor chooses to use the option described in this 
paragraph, the contractor need not comply with the accrual requirements 
described in paragraph (a)(1) of this section. The contractor must, 
however, allow carryover of paid sick leave as required by paragraph 
(b)(2) of this section, and

[[Page 67714]]

although the contractor may limit the amount of paid sick leave an 
employee may carry over to no less than 56 hours, the contractor may 
not limit the amount of paid sick leave an employee has available for 
use at any point as is otherwise permitted by paragraph (b)(3) of this 
section.
    (ii) If a contractor chooses to use the option described in this 
paragraph and the contractor hires an employee or newly assigns the 
employee to work on or in connection with a covered contract after the 
beginning of the accrual year, the contractor may provide the employee 
with a prorated amount of paid sick leave based on the number of pay 
periods remaining in the accrual year.
    (iii) A contractor may use the option described in this paragraph 
as to any or all of its employees in any or all accrual years.
    (b) Maximum accrual, carryover, reinstatement, and payment for 
unused leave. (1) A contractor may limit the amount of paid sick leave 
an employee is permitted to accrue to not less than 56 hours in each 
accrual year. An accrual year is a 12-month period beginning on the 
date an employee's work on or in connection with a covered contract 
began or any other fixed date chosen by the contractor, such as the 
date a covered contract began, the date the contractor's fiscal year 
begins, a date relevant under State law, or the date a contractor uses 
for determining employees' leave entitlements under the FMLA pursuant 
to Sec.  825.200 of this title. A contractor may choose its accrual 
year but must use a consistent option for all, or across similarly 
situated groups of, employees and may not select or change any 
employee's accrual year in order to avoid the paid sick leave 
requirements of Executive Order 13706 and this part.
    (2) Paid sick leave shall carry over from one accrual year to the 
next. Paid sick leave carried over from the previous accrual year shall 
not count toward any limit the contractor sets on annual accrual.
    (3) A contractor may limit the amount of paid sick leave an 
employee is permitted to have available for use at any point to not 
less than 56 hours. Accordingly, even if an employee has accrued fewer 
than 56 hours of paid sick leave since the beginning of the accrual 
year, the employee need only be permitted to accrue additional paid 
sick leave if the employee has fewer than 56 hours available for use.
    (4) Paid sick leave shall be reinstated for employees rehired by 
the same contractor within 12 months after a job separation. This 
reinstatement requirement applies whether the employee leaves and 
returns to a job on or in connection with a single covered contract or 
works for a single contractor on or in connection with more than one 
covered contract, regardless of whether the employee remains employed 
by the contractor in between periods of working on covered contracts.
    (5) Nothing in Executive Order 13706 or this part shall require a 
contractor to make a financial payment to an employee for accrued paid 
sick leave that has not been used upon a separation from employment. If 
a contractor nevertheless makes such a payment in an amount equal to or 
greater than the value of the pay and benefits the employee would have 
received pursuant to paragraph (c)(3) of this section had the employee 
used the paid sick leave, the contractor is relieved of the obligation 
to reinstate an employee's accrued paid sick leave upon rehiring the 
employee within 12 months of the separation pursuant to paragraph 
(b)(4) of this section.
    (c) Use. (1) Subject to the conditions described in paragraphs (d) 
and (e) of this section and the amount of paid sick leave the employee 
has available for use, a contractor must permit an employee to use paid 
sick leave to be absent from work for that contractor during time the 
employee would have been performing work on or in connection with a 
covered contract or, if the contractor estimates the employee's hours 
worked in connection with such contracts for purposes of accrual, 
during any work time because of:
    (i) A physical or mental illness, injury, or medical condition of 
the employee;
    (ii) Obtaining diagnosis, care, or preventive care from a health 
care provider by the employee;
    (iii) Caring for the employee's child, parent, spouse, domestic 
partner, or any other individual related by blood or affinity whose 
close association with the employee is the equivalent of a family 
relationship who has any of the conditions or needs for diagnosis, 
care, or preventive care referred to in paragraphs (c)(1)(i) or (ii) of 
this section or is otherwise in need of care; or
    (iv) Domestic violence, sexual assault, or stalking, if the time 
absent from work is for the purposes otherwise described in paragraphs 
(c)(1)(i) or (ii) of this section or to obtain additional counseling, 
seek relocation, seek assistance from a victim services organization, 
take related legal action, including preparation for or participation 
in any related civil or criminal legal proceeding, or assist an 
individual related to the employee as described in paragraph 
(c)(1)(iii) of this section in engaging in any of these activities.
    (2) A contractor shall account for an employee's use of paid sick 
leave in increments of no greater than 1 hour.
    (i) A contractor may not reduce an employee's accrued paid sick 
leave by more than the amount of time the employee is actually absent 
from work, and a contractor may not require an employee to use more 
leave than is necessary to address the circumstances that precipitated 
the need for the leave, provided that the leave is counted using an 
increment of no greater than 1 hour.
    (ii) The amount of paid sick leave used may not exceed the hours an 
employee would have worked if the need for leave had not arisen.
    (iii) If it is physically impossible for an employee using paid 
sick leave to commence or end work mid-way through a shift, such as if 
a flight attendant or a railroad conductor is scheduled to work aboard 
an airplane or train, or a laboratory employee is unable to enter or 
leave a sealed ``clean room'' during a certain period of time, and no 
equivalent position is available, the entire period that the employee 
is forced to be absent constitutes paid sick leave. The period of the 
physical impossibility is limited to the period during which the 
contractor is unable to permit the employee to work prior to the use of 
paid sick leave or return the employee to the same or an equivalent 
position due to the physical impossibility after the use of paid sick 
leave.
    (3) A contractor shall provide to an employee using paid sick leave 
the same regular pay and benefits the employee would have received had 
the employee not been absent from work. Regular pay means payments that 
would be included in the calculation of the employee's regular rate for 
hours worked under the Fair Labor Standards Act as set forth in 29 CFR 
part 778.
    (4) A contractor may not limit the amount of paid sick leave an 
employee may use per year or at once on any basis other than the amount 
of paid sick leave an employee has available.
    (5) An employee is encouraged to make a reasonable effort to 
schedule preventive care or another foreseeable need to use paid sick 
leave to suit the needs of both the contractor and employee, and a 
contractor may ask an employee to make a reasonable effort to schedule 
foreseeable paid sick leave so as to not disrupt unduly the 
contractor's operations, but a contractor may not make an employee's 
use of paid sick leave contingent on the employee's finding a 
replacement worker to cover any work time to be missed or on the

[[Page 67715]]

fulfillment of the contractor's operational needs.
    (d) Request for leave. (1) A contractor shall permit an employee to 
use any or all of the employee's available paid sick leave upon the 
oral or written request of an employee that includes information 
sufficient to inform the contractor that the employee is seeking to be 
absent from work for a purpose described in paragraph (c)(1) of this 
section and, to the extent reasonably feasible, the anticipated 
duration of the leave.
    (i) An employee's request to use paid sick leave need not include a 
specific reference to the Executive Order or this part or even use the 
words ``sick leave'' or ``paid sick leave,'' and a contractor may not 
require an employee to provide extensive or detailed information about 
the need to be absent from work or the employee's family or family-like 
relationship with an individual for whom the employee is requesting to 
care.
    (ii) Although an employee shall make a good faith effort to provide 
a reasonable estimate of the length of the requested absence from work, 
a contractor shall permit the employee to return to work earlier, or 
continue to use available paid sick leave for longer, than anticipated.
    (iii) The employee's request shall be directed to the appropriate 
personnel pursuant to a contractor's policy or, in the absence of a 
formal policy, any personnel who typically receive requests for other 
types of leave or otherwise address scheduling issues on behalf of the 
contractor.
    (iv) The contractor shall maintain the confidentiality of any 
medical or other personal information contained in an employee's 
request to use paid sick leave as required by Sec.  13.25(d).
    (2) If the need for leave is foreseeable, the employee's request 
shall be made at least 7 calendar days in advance. If the employee is 
unable to request paid sick leave at least 7 calendar days in advance, 
the request shall be made as soon as is practicable. When an employee 
becomes aware of a need to use paid sick leave less than 7 calendar 
days in advance, it should typically be practicable for the employee to 
make a request for leave either the day the employee becomes aware of 
the need to use paid sick leave or the next business day. In all cases, 
however, the determination of when an employee could practicably make a 
request must take into account the individual facts and circumstances.
    (3)(i) A contractor may communicate its grant of a request to use 
paid sick leave either orally or in writing (including electronically, 
if the contractor customarily corresponds with or makes information 
available to its employees by such means).
    (ii) A contractor shall communicate any denial of a request to use 
paid sick leave in writing (including electronically, if the contractor 
customarily corresponds with or makes information available to its 
employees by such means), with an explanation for the denial. Denial is 
appropriate if, for example, the employee did not provide sufficient 
information about the need for paid sick leave; the reason given is not 
consistent with the uses of paid sick leave described in paragraph 
(c)(1) of this section; the employee did not indicate when the need 
would arise; the employee has not accrued, and will not have accrued by 
the date of leave anticipated in the request, a sufficient amount of 
paid sick leave to cover the request (in which case, if the employee 
will have any paid sick leave available for use, only a partial denial 
is appropriate); or the request is to use paid sick leave during time 
the employee is scheduled to be performing non-covered work. If the 
denial is based on insufficient information provided in the request, 
such as if the employee did not state the time of an appointment with a 
health care provider, the contractor must permit the employee to submit 
a new, corrected request. If the denial is based on an employee's 
request to use paid sick leave during time she is scheduled to be 
performing non-covered work, the denial must be supported by records 
adequately segregating the employee's time spent on covered and non-
covered contracts.
    (iii) A contractor shall respond to any request to use paid sick 
leave as soon as is practicable after the request is made. Although the 
determination of when it is practicable for a contractor to provide a 
response will take into account the individual facts and circumstances, 
it should in many circumstances be practicable for the contractor to 
respond to a request immediately or within a few hours. In some 
instances, however, such as if it is unclear at the time of the request 
whether the employee will be working on or in connection with a covered 
or non-covered contract at the time for which paid sick leave is 
requested, as soon as practicable could mean within a day or no longer 
than within a few days.
    (e) Certification or documentation for leave of 3 or more 
consecutive full workdays. (1)(i) A contractor may require 
certification issued by a health care provider to verify the need for 
paid sick leave used for a purpose described in paragraphs (c)(1)(i), 
(ii), or (iii) of this section only if the employee is absent for 3 or 
more consecutive full workdays. The contractor shall protect the 
confidentiality of any certification as required by Sec.  13.25(d).
    (ii) A contractor may only require documentation from an 
appropriate individual or organization to verify the need for paid sick 
leave used for a purpose described in paragraph (c)(1)(iv) of this 
section only if the employee is absent for 3 or more consecutive full 
workdays. The source of such documentation may be any person involved 
in providing or assisting with the care, counseling, relocation, 
assistance of a victim services organization, or related legal action, 
such as, but not limited to, a health care provider, counselor, 
representative of a victim services organization, attorney, clergy 
member, family member, or close friend. Self-certification is also 
permitted. The contractor may only require that such documentation 
contain the minimum necessary information establishing a need for the 
employee to be absent from work. The contractor shall not disclose any 
verification information and shall maintain confidentiality about the 
domestic abuse, sexual assault, or stalking, as required by Sec.  
13.25(d).
    (2) If certification or documentation is to verify the illness, 
injury, or condition, need for diagnosis, care, or preventive care, or 
activity related to domestic violence, sexual assault, or stalking of 
an individual related to the employee as described in paragraph 
(c)(1)(iii) of this section, a contractor may also require the employee 
to provide reasonable documentation or a statement of the family or 
family-like relationship. This documentation may take the form of a 
simple written statement from the employee or could be a legal or other 
document proving the relationship, such as a birth certificate or court 
order.
    (3)(i) A contractor may only require certification or documentation 
if the contractor informs an employee before the employee returns to 
work that certification or documentation will be required to verify the 
use of paid sick leave if the employee is absent for 3 or more 
consecutive full workdays. The contractor may inform an employee of 
this requirement each time the employee requests to use or does use 
paid sick leave, or the contractor may inform employees of a general 
policy to require certification or documentation for absences of 3 or 
more consecutive full workdays if it does so in a manner reasonably 
calculated to provide actual notice of the requirement to employees.
    (ii) A contractor may require the employee to provide certification 
or documentation within 30 days of the

[[Page 67716]]

first day of the 3 or more consecutive full workdays of paid sick leave 
but may not set a shorter deadline for its submission.
    (iii) While a contractor is waiting for or reviewing certification 
or documentation, it must treat the employee's otherwise proper request 
for 3 or more consecutive full workdays of paid sick leave as valid. If 
the employee provides certification or documentation that is 
insufficient to verify the employee's need for paid sick leave, the 
contractor shall notify the employee of the deficiency and allow the 
employee at least 5 days to provide new or supplemental certification 
or documentation. If after 30 days the employee has not provided any 
certification or documentation, or if after the 5 or more days allowed 
for resubmission the employee has either provided no new or 
supplemental certification or documentation or the new certification or 
documentation is still insufficient to verify the employee's need for 
paid sick leave, the contractor may, within 10 calendar days of the 
employee's deadline for providing sufficient certification or 
documentation, retroactively deny the employee's request to use paid 
sick leave. In such circumstances, the contractor may recover the value 
of the pay and benefits the employee received but to which the employee 
was not entitled, including through deduction from any sums due to the 
employee (e.g., unpaid wages, vacation pay, profit sharing, etc.), 
provided such deductions do not otherwise violate applicable Federal, 
State, or local wage payment or other laws.
    (4) A contractor may contact the health care provider or other 
individual who created or signed the certification or documentation 
only for purposes of authenticating the document or clarifying its 
contents. The contractor may not request additional details about the 
medical or other condition referenced, seek a second opinion, or 
otherwise question the substance of the certification. To make such 
contact, the contractor must use a human resources professional, a 
leave administrator, or a management official. The employee's direct 
supervisor may not contact the employee's health care provider unless 
there is no other appropriate individual who can do so. The 
requirements of the Health Insurance Portability and Accountability Act 
(HIPAA) Privacy Rule, set forth at 45 CFR parts 160 and 164, must be 
satisfied when individually identifiable health information of an 
employee is shared with a contractor by a HIPAA-covered health care 
provider.
    (f) Interaction with other laws and paid time off policies. (1) 
General. Nothing in Executive Order 13706 or this part shall excuse 
noncompliance with or supersede any applicable Federal or State law, 
any applicable law or municipal ordinance, or a collective bargaining 
agreement requiring greater paid sick leave or leave rights than those 
established under the Executive Order and this part.
    (2) SCA and DBA requirements. (i) Paid sick leave required by 
Executive Order 13706 and this part is in addition to a contractor's 
obligations under the Service Contract Act and Davis-Bacon Act. A 
contractor may not receive credit toward its prevailing wage or fringe 
benefit obligations under those Acts for any paid sick leave provided 
in satisfaction of the requirements of Executive Order 13706 and this 
part.
    (ii) A contractor may count the value of any paid sick time 
provided in excess of the requirements of Executive Order 13706 and 
this part (and any other law) toward its obligations under the Service 
Contract Act or Davis-Bacon Act in keeping with the requirements of 
those Acts.
    (3) FMLA. A contractor's obligations under the Executive Order and 
this part have no effect on its obligations to comply with, or ability 
to act pursuant to, the Family and Medical Leave Act. Paid sick leave 
may be substituted for (that is, may run concurrently with) unpaid FMLA 
leave under the same conditions as other paid time off pursuant to 
Sec.  825.207 of this title. As to time off that is designated as FMLA 
leave and for which an employee uses paid sick leave, all notices and 
certifications that satisfy the FMLA requirements set forth at Sec.  
825.300 through 300.308 of this title will satisfy the request for 
leave and certification requirements of paragraphs (d) and (e) of this 
section.
    (4) State and local paid sick time laws. A contractor's compliance 
with a State or local law requiring that employees be provided with 
paid sick time does not excuse the contractor from compliance with any 
of its obligations under the Executive Order 13706 or this part. A 
contractor may, however, satisfy its obligations under the Order and 
this part by providing paid sick time that fulfills the requirements of 
a State or local law provided that the paid sick time is accrued and 
may be used in a manner that meets or exceeds all of the requirements 
of the Order and this part including but not limited to the accrual and 
use requirements in this section and the prohibitions on interference 
and discrimination in Sec.  13.6. Where the requirements of an 
applicable State or local law and the Order and this part differ, 
satisfying both will require a contractor to comply with the 
requirement that is more generous to employees.
    (5) Paid time off policies. (i) The paid sick leave requirements of 
Executive Order 13706 and this part need not have any effect on a 
contractor's voluntary paid time off policy, whether provided pursuant 
to a collective bargaining agreement or otherwise.
    (ii) A contractor's existing paid time off policy (if provided in 
addition to the fulfillment of Service Contract Act or Davis-Bacon Act 
obligations, if applicable) will satisfy the requirements of the 
Executive Order and this part if the paid time off is made available to 
all employees described in Sec.  13.3(a)(2) (other than those excluded 
by Sec.  13.4(e)); may be used for at least all of the purposes 
described in paragraph (c)(1) of this section; is provided in a manner 
and an amount sufficient to comply with the rules and restrictions 
regarding the accrual of paid sick leave set forth in paragraph (a) of 
this section and regarding maximum accrual, carryover, reinstatement, 
and payment for unused leave set forth in paragraph (b) of this 
section; is provided pursuant to policies sufficient to comply with the 
rules and restrictions regarding use of paid sick leave set forth in 
paragraph (c) of this section, regarding requests for leave set forth 
in paragraph (d) of this section, and regarding certification and 
documentation set forth in paragraph (e) of this section, at least with 
respect to any paid time off used for the purposes described in 
paragraph (c)(1) of this section; and is protected by the prohibitions 
against interference, discrimination, and recordkeeping violations 
described in Sec.  13.6 and the prohibition against waiver of rights 
described in Sec.  13.7, at least with respect to any paid time off 
used for the purposes described in paragraph (c)(1) of this section.
    (iii) A contractor satisfying the requirements of the Executive 
Order and this part with a paid time off policy that provides more than 
56 hours of leave per accrual year may choose to either provide all 
paid time off as described in paragraph (f)(5)(ii) of this section or 
track, and make and maintain records reflecting, the amount of paid 
time off an employee uses for the purposes described in paragraph 
(c)(1) of this section, in which case the contractor need only provide, 
for each accrual year, up to 56 hours of paid time off the employee 
requests to use for such purposes in compliance with the Order and this 
part.

[[Page 67717]]

Sec.  13.6  Prohibited acts.

    (a) Interference. (1) A contractor may not in any manner interfere 
with an employee's accrual or use of paid sick leave as required by 
Executive Order 13706 or this part.
    (2) Interference includes, but is not limited to, miscalculating 
the amount of paid sick leave an employee has accrued, denying or 
unreasonably delaying a response to a proper request to use paid sick 
leave, discouraging an employee from using paid sick leave, reducing an 
employee's accrued paid sick leave by more than the amount of such 
leave used, transferring the employee to work on non-covered contracts 
to prevent the accrual or use of paid sick leave, disclosing 
confidential information contained in certification or other 
documentation provided to verify the need to use paid sick leave, or 
making the use of paid sick leave contingent on the employee's finding 
a replacement worker or the fulfillment of the contractor's operational 
needs.
    (b) Discrimination. (1) A contractor may not discharge or in any 
other manner discriminate against any employee for:
    (i) Using, or attempting to use, paid sick leave as provided for 
under Executive Order 13706 and this part;
    (ii) Filing any complaint, initiating any proceeding, or otherwise 
asserting any right or claim under Executive Order 13706 or this part;
    (iii) Cooperating in any investigation or testifying in any 
proceeding under Executive Order 13706 or this part; or
    (iv) Informing any other person about his or her rights under 
Executive Order 13706 or this part.
    (2) Discrimination includes, but is not limited to, a contractor's 
considering any of the activities described in paragraph (b)(1) of this 
section as a negative factor in employment actions, such as hiring, 
promotions, or disciplinary actions, or a contractor's counting paid 
sick leave under a no fault attendance policy.
    (c) Recordkeeping. A contractor's failure to make and maintain or 
to make available to authorized representatives of the Wage and Hour 
Division records for inspection, copying, and transcription as required 
by Sec.  13.25, or any other failure to comply with the requirements of 
Sec.  13.25, constitutes a violation of Executive Order 13706, this 
part, and the underlying contract.


Sec.  13.7  Waiver of rights.

    Employees cannot waive, nor may contractors induce employees to 
waive, their rights under Executive Order 13706 or this part.


Sec.  13.8  Multiemployer plans or other funds, plans, or programs.

    (a) A contractor may fulfill its obligations under Executive Order 
13706 and this part jointly with other contractors--that is, as though 
all of the contractors are a single contractor--through a multiemployer 
plan that provides paid sick leave in compliance with the rules and 
requirements of Executive Order 13706 and this part. Regardless of what 
functions the plan performs, each contractor remains responsible for 
any violation of the Order or this part that occurs during its 
employment of the employee.
    (b) Nothing in this part prohibits a contractor from providing paid 
sick leave through a fund, plan, or program. Regardless of the manner 
in which a contractor provides paid sick leave or what functions any 
fund, plan, or program performs, the contractor remains responsible for 
any violation of the Order or this part with respect to any of its 
employees.

Subpart B--Federal Government Requirements


Sec.  13.11  Contracting agency requirements.

    (a) Contract clause. The contracting agency shall include the 
Executive Order paid sick leave contract clause set forth in Appendix A 
of this part in all covered contracts and solicitations for such 
contracts, as described in Sec.  13.3, except for procurement contracts 
subject to the FAR. The required contract clause directs, as a 
condition of payment, that all employees performing work on or in 
connection with covered contracts shall be provided paid sick leave as 
required by Executive Order 13706 and this part. For procurement 
contracts subject to the FAR, contracting agencies must use the clause 
set forth in the FAR developed to implement this rule. Such clause will 
accomplish the same purposes as the clause set forth in Appendix A and 
be consistent with the requirements set forth in this rule.
    (b) Failure to include the contract clause. Where the Department of 
Labor or the contracting agency discovers or determines, whether before 
or subsequent to a contract award, that a contracting agency made an 
erroneous determination that Executive Order 13706 and this part did 
not apply to a particular contract and/or failed to include the 
applicable contract clause in a contract to which the Executive Order 
and this part apply, the contracting agency, on its own initiative or 
within 15 calendar days of notification by an authorized representative 
of the Department of Labor, shall incorporate the contract clause in 
the contract retroactive to commencement of performance under the 
contract through the exercise of any and all authority that may be 
needed (including, where necessary, its authority to negotiate or 
amend, its authority to pay any necessary additional costs, and its 
authority under any contract provision authorizing changes, 
cancellation, and termination).
    (c) Withholding. A contracting officer shall, upon his or her own 
action or upon written request of the Administrator, withhold or cause 
to be withheld from the prime contractor under the covered contract or 
any other Federal contract with the same prime contractor, so much of 
the accrued payments or advances as may be considered necessary to pay 
employees the full amount owed to compensate for any violation of 
Executive Order 13706 or this part. In the event of any such violation, 
the agency may, after authorization or by direction of the 
Administrator and written notification to the contractor, take action 
to cause suspension of any further payment, advance, or guarantee of 
funds until such violations have ceased. Additionally, any failure to 
comply with the requirements of Executive Order 13706 or this part may 
be grounds for termination of the right to proceed with the contract 
work. In such event, the contracting agency may enter into other 
contracts or arrangements for completion of the work, charging the 
contractor in default with any additional cost.
    (d) Suspending payment. A contracting officer shall, upon his or 
her own action or upon the direction of the Administrator and 
notification of the contractor, take action to cause suspension of any 
further payment, advance, or guarantee of funds to a contractor that 
has failed to make available for inspection, copying, and transcription 
any of the records identified in Sec.  13.25.
    (e) Actions on complaints--(1) Reporting time frame. The 
contracting agency shall forward all information listed in paragraph 
(e)(2) of this section to the Office of Government Contracts 
Enforcement, Wage and Hour Division, U.S. Department of Labor, 200 
Constitution Avenue NW., Washington, DC 20210 within 14 calendar days 
of receipt of a complaint alleging contractor noncompliance with 
Executive Order 13706 or this part or within 14 calendar days of being 
contacted by the Wage and Hour Division regarding any such complaint.
    (2) Report contents. The contracting agency shall forward to the 
Office of Government Contracts Enforcement,

[[Page 67718]]

Wage and Hour Division, U.S. Department of Labor, 200 Constitution 
Avenue NW., Washington, DC 20210 any:
    (i) Complaint of contractor noncompliance with Executive Order 
13706 or this part;
    (ii) Available statements by the worker, contractor, or any other 
person regarding the alleged violation;
    (iii) Evidence that the Executive Order paid sick leave contract 
clause was included in the contract;
    (iv) Information concerning known settlement negotiations between 
the parties, if applicable; and
    (v) Any other relevant facts known to the contracting agency or 
other information requested by the Wage and Hour Division.


Sec.  13.12  Department of Labor requirements.

    (a) Notice--(1) Wage Determinations OnLine Web site. The 
Administrator will publish and maintain on Wage Determinations OnLine 
(WDOL), http://www.wdol.gov, or any successor site, a notice that 
Executive Order 13706 creates a requirement to allow employees 
performing work on or in connection with contracts covered by Executive 
Order 13706 and this part to accrue and use paid sick leave, as well as 
an indication of where to find more complete information about that 
requirement.
    (2) Wage determinations. The Administrator will publish on all wage 
determinations issued under the Davis-Bacon Act and the Service 
Contract Act a notice that Executive Order 13706 creates a requirement 
to allow employees performing work on or in connection with contracts 
covered by Executive Order 13706 and this part to accrue and use paid 
sick leave, as well as an indication of where to find more complete 
information about that requirement.
    (b) Notification to a contractor of the withholding of funds. If 
the Administrator requests that a contracting agency withhold funds 
from a contractor pursuant to Sec.  13.11(c), or suspend payment, 
advance, or guarantee of funds pursuant to Sec.  13.11(d), the 
Administrator and/or contracting agency shall notify the affected prime 
contractor of the Administrator's request to the contracting agency.

Subpart C--Contractor Requirements


Sec.  13.21  Contract clause.

    (a) The contractor, as a condition of payment, shall abide by the 
terms of the applicable Executive Order paid sick leave contract clause 
referred to in Sec.  13.11(a).
    (b) The contractor shall include in any covered subcontracts the 
applicable Executive Order paid sick leave contract clause referred to 
in Sec.  13.11(a) and shall require, as a condition of payment, that 
the subcontractor include the contract clause in any lower-tier 
subcontracts. The prime contractor and any upper-tier contractor shall 
be responsible for the compliance by any subcontractor or lower-tier 
subcontractor with the requirements of Executive Order 13706 and this 
part, whether or not the contract clause was included in the 
subcontract.


Sec.  13.22  Paid sick leave.

    The contractor shall allow all employees performing work on or in 
connection with a covered contract to accrue and use paid sick leave as 
required by Executive Order 13706 and this part.


Sec.  13.23  Deductions.

    The contractor may make deductions from the pay and benefits of an 
employee who is using paid sick leave only if such deduction qualifies 
as a:
    (a) Deduction required by Federal, State, or local law, such as 
Federal or State withholding of income taxes;
    (b) Deduction for payments made to third parties pursuant to court 
order;
    (c) Deduction directed by a voluntary assignment of the employee or 
his or her authorized representative;
    (d) Deduction for the reasonable cost or fair value, as determined 
by the Administrator, of furnishing such employee with ``board, 
lodging, or other facilities,'' as defined in 29 U.S.C. 203(m) and 29 
CFR part 531;
    (e) Deduction, to the extent permitted by law, for the purpose of 
recouping pay and benefits provided for paid sick leave as to which the 
contractor retroactively denied the employee's request pursuant to 
Sec.  13.5(e)(3)(iii) or because the contractor approved the use of the 
paid sick leave based on a fraudulent request.


Sec.  13.24  Anti-kickback.

    All paid sick leave used by employees performing on or in 
connection with covered contracts must be paid free and clear and 
without subsequent deduction (except as set forth in Sec.  13.23), 
rebate, or kickback on any account. Kickbacks directly or indirectly to 
the contractor or to another person for the contractor's benefit for 
the whole or part of the paid sick leave are prohibited.


Sec.  13.25  Records to be kept by contractors.

    (a) The contractor and each subcontractor performing work subject 
to Executive Order 13706 and this part shall make and maintain during 
the course of the covered contract, and preserve for no less than 3 
years thereafter, records containing the information specified in 
paragraphs (a)(1) through (15) of this section for each employee and 
shall make them available for inspection, copying, and transcription by 
authorized representatives of the Wage and Hour Division of the U.S. 
Department of Labor:
    (1) Name, address, and Social Security number of each employee;
    (2) The employee's occupation(s) or classification(s);
    (3) The rate or rates of wages paid (including all pay and benefits 
provided);
    (4) The number of daily and weekly hours worked;
    (5) Any deductions made;
    (6) The total wages paid (including all pay and benefits provided) 
each pay period;
    (7) A copy of notifications to employees of the amount of paid sick 
leave the employees have accrued as required under Sec.  13.5(a)(2);
    (8) A copy of employees' requests to use paid sick leave, if in 
writing, or, if not in writing, any other records reflecting such 
employee requests;
    (9) Dates and amounts of paid sick leave used by employees (unless 
a contractor's paid time off policy satisfies the requirements of 
Executive Order 13706 and this part as described in Sec.  13.5(f)(5), 
leave must be designated in records as paid sick leave pursuant to 
Executive Order 13706);
    (10) A copy of any written responses to employees' requests to use 
paid sick leave, including explanations for any denials of such 
requests, as required under Sec.  13.5(d)(3);
    (11) Any records relating to the certification and documentation a 
contractor may require an employee to provide under Sec.  13.5(e), 
including copies of any certification or documentation provided by an 
employee;
    (12) Any other records showing any tracking of or calculations 
related to an employee's accrual and/or use of paid sick leave;
    (13) The relevant covered contract;
    (14) The regular pay and benefits provided to an employee for each 
use of paid sick leave; and
    (15) Any financial payment made for unused paid sick leave upon a 
separation from employment intended, pursuant to Sec.  13.5(b)(5), to 
relieve a contractor from the obligation to reinstate such paid sick 
leave as otherwise required by Sec.  13.5(b)(4).
    (b) Segregation of time. (1) If a contractor wishes to distinguish

[[Page 67719]]

between an employee's covered and non-covered work (such as time spent 
performing work on or in connection with a covered contract versus time 
spent performing work on or in connection with non-covered contracts or 
time spent performing work on or in connection with a covered contract 
in the United States versus time spent performing work outside the 
United States, or to establish that time spent performing solely in 
connection with covered contracts constituted less than 20 percent of 
an employee's hours worked during a particular workweek), the 
contractor must keep records or other proof reflecting such 
distinctions. Only if the contractor adequately segregates the 
employee's time will time spent on non-covered work be excluded from 
hours worked counted toward the accrual of paid sick leave. Similarly, 
only if that contractor adequately segregates the employee's time may a 
contractor properly deny an employee's request to take leave under 
Sec.  13.5(d) on the ground that the employee was scheduled to perform 
non-covered work during the time she asked to use paid sick leave.
    (2) If a contractor estimates covered hours worked by an employee 
who performs work in connection with covered contracts pursuant to 
Sec.  13.5(a)(1)(i) or (iii), the contractor must keep records or other 
proof of the verifiable information on which such estimates are 
reasonably based. Only if the contractor relies on an estimate that is 
reasonable and based on verifiable information will an employee's time 
spent in connection with non-covered contracts be excluded from hours 
worked counted toward the accrual of paid sick leave. If a contractor 
estimates the amount of time an employee spends performing in 
connection with covered contracts, the contractor must permit the 
employee to use her paid sick leave during any work time for the 
contractor.
    (c) If a contractor is not obligated by the Service Contract Act, 
Davis-Bacon Act, or Fair Labor Standards Act to keep records of an 
employee's hours worked, such as because the employee is employed in a 
bona fide executive, administrative, or professional capacity as those 
terms are defined in 29 CFR part 541, and the contractor chooses to use 
the assumption permitted by Sec.  13.5(a)(1)(iii), the contractor is 
excused from the requirement in paragraph (a)(4) of this section to 
keep records of the employee's number of daily and weekly hours worked.
    (d)(1) Records relating to medical histories or domestic violence, 
sexual assault, or stalking, created by or provided to a contractor for 
purposes of Executive Order 13706, whether of an employee or an 
employee's child, parent, spouse, domestic partner, or other individual 
related by blood or affinity whose close association with the employee 
is the equivalent of a family relationship, shall be maintained as 
confidential records in separate files/records from the usual personnel 
files.
    (2) If the confidentiality requirements of the Genetic Information 
Nondiscrimination Act of 2008 (GINA), section 503 of the Rehabilitation 
Act of 1973, and/or the Americans with Disabilities Act (ADA) apply to 
medical information contained in records or documents that the 
contractor created or received in connection with compliance with the 
recordkeeping or other requirements of this part, the records and 
documents must also be maintained in compliance with the 
confidentiality requirements of the GINA, section 503 of the 
Rehabilitation Act of 1973, and/or ADA as described in Sec.  1635.9 of 
this title, 41 CFR 60-741.23(d), and Sec.  1630.14(c)(1) of this title, 
respectively.
    (3) The contractor shall not disclose any documentation used to 
verify the need to use 3 or more consecutive days of paid sick leave 
for the purposes listed in Sec.  13.5(c)(1)(iv) (as described in Sec.  
13.5(d)(2)) and shall maintain confidentiality about any domestic 
abuse, sexual assault, or stalking, unless the employee consents or 
when disclosure is required by law.
    (e) The contractor shall permit authorized representatives of the 
Wage and Hour Division to conduct interviews with employees at the 
worksite during normal working hours.
    (f) Nothing in this part limits or otherwise modifies the 
contractor's recordkeeping obligations, if any, under the Davis-Bacon 
Act, the Service Contract Act, the Fair Labor Standards Act, the Family 
and Medical Leave Act, Executive Order 13658, their implementing 
regulations, or other applicable law.


Sec.  13.26  Notice.

    (a) The contractor must notify all employees performing work on or 
in connection with a covered contract of the paid sick leave 
requirements of Executive Order 13706 and this part by posting a notice 
provided by the Department of Labor in a prominent and accessible place 
at the worksite so it may be readily seen by employees.
    (b) Contractors that customarily post notices to employees 
electronically may post the notice electronically, provided such 
electronic posting is displayed prominently on any Web site that is 
maintained by the contractor, whether external or internal, and 
customarily used for notices to employees about terms and conditions of 
employment.


Sec.  13.27  Timing of pay.

    The contractor shall compensate an employee for time during which 
the employee used paid sick leave no later than one pay period 
following the end of the regular pay period in which the paid sick 
leave was used.

Subpart D--Enforcement


Sec.  13.41  Complaints.

    (a) Any employee, contractor, labor organization, trade 
organization, contracting agency, or other person or entity that 
believes a violation of the Executive Order or this part has occurred 
may file a complaint with any office of the Wage and Hour Division. No 
particular form of complaint is required. A complaint may be filed 
orally or in writing. If the complainant is unable to file the 
complaint in English, the Wage and Hour Division will accept the 
complaint in any language.
    (b) It is the policy of the Department of Labor to protect the 
identity of its confidential sources and to prevent an unwarranted 
invasion of personal privacy. Accordingly, the identity of any 
individual who makes a written or oral statement as a complaint or in 
the course of an investigation, as well as portions of the statement 
which would reveal the individual's identity, shall not be disclosed in 
any manner to anyone other than Federal officials without the prior 
consent of the individual. Disclosure of such statements shall be 
governed by the provisions of the Freedom of Information Act, 5 U.S.C. 
552, 29 CFR part 70, and the Privacy Act of 1974, 5 U.S.C. 552a.


Sec.  13.42  Wage and Hour Division conciliation.

    After receipt of a complaint, the Administrator may seek to resolve 
the matter through conciliation.


Sec.  13.43  Wage and Hour Division investigation.

    The Administrator may investigate possible violations of the 
Executive Order or this part either as the result of a complaint or at 
any time on his or her own initiative. As part of the investigation, 
the Administrator may conduct interviews with the relevant contractor, 
as well as the contractor's employees at the worksite during normal 
work hours; inspect the relevant contractor's records (including 
contract documents and payrolls, if applicable); make copies and 
transcriptions of such records; and require the production of

[[Page 67720]]

any documentary or other evidence the Administrator deems necessary to 
determine whether a violation, including conduct warranting imposition 
of debarment, has occurred. Federal agencies and contractors shall 
cooperate with any authorized representative of the Department of Labor 
in the inspection of records, in interviews with employees, and in all 
aspects of investigations.


Sec.  13.44  Remedies and sanctions.

    (a) Interference. When the Administrator determines that a 
contractor has interfered with an employee's accrual or use of paid 
sick leave in violation of Sec.  13.6(a), the Administrator will notify 
the contractor and the relevant contracting agency of the interference 
and request that the contractor remedy the violation. If the contractor 
does not remedy the violation, the Administrator shall direct the 
contractor to provide any appropriate relief to the affected 
employee(s) in the investigative findings letter issued pursuant to 
Sec.  13.51. Such relief may include any pay and/or benefits denied or 
lost by reason of the violation; other actual monetary losses sustained 
as a direct result of the violation; or appropriate equitable or other 
relief. Payment of liquidated damages in an amount equaling any 
monetary relief may also be directed unless such amount is reduced by 
the Administrator because the violation was in good faith and the 
contractor had reasonable grounds for believing it had not violated the 
Order or this part. The Administrator may additionally direct that 
payments due on the contract or any other contract between the 
contractor and the Federal Government be withheld as may be necessary 
to provide any appropriate monetary relief. Upon the final order of the 
Secretary that monetary relief is due, the Administrator may direct the 
relevant contracting agency to transfer the withheld funds to the 
Department of Labor for disbursement.
    (b) Discrimination. When the Administrator determines that a 
contractor has discriminated against an employee in violation of Sec.  
13.6(b), the Administrator will notify the contractor and the relevant 
contracting agency of the discrimination and request that the 
contractor remedy the violation. If the contractor does not remedy the 
violation, the Administrator shall direct the contractor to provide 
appropriate relief to the affected employee(s) in the investigative 
findings letter issued pursuant to Sec.  13.51. Such relief may 
include, but is not limited to, employment, reinstatement, promotion, 
restoration of leave, or lost pay and/or benefits. Payment of 
liquidated damages in an amount equaling any monetary relief may also 
be directed unless such amount is reduced by the Administrator because 
the violation was in good faith and the contractor had reasonable 
grounds for believing the contractor had not violated the Order or this 
part. The Administrator may additionally direct that payments due on 
the contract or any other contract between the contractor and the 
Federal Government be withheld as may be necessary to provide any 
appropriate monetary relief. Upon the final order of the Secretary that 
monetary relief is due, the Administrator may direct the relevant 
contracting agency to transfer the withheld funds to the Department of 
Labor for disbursement.
    (c) Recordkeeping. When a contractor fails to comply with the 
requirements of Sec.  13.25 in violation of Sec.  13.6(c), the 
Administrator will request that the contractor remedy the violation. If 
the contractor fails to produce required records upon request, the 
contracting officer, upon direction of an authorized representative of 
the Department of Labor, or under its own action, shall take such 
action as may be necessary to cause suspension of any further payment, 
advance, or guarantee of funds on the contract until such time as the 
violations are discontinued.
    (d) Debarment. Whenever a contractor is found by the Secretary to 
have disregarded its obligations under the Executive Order or this 
part, such contractor and its responsible officers, and any firm, 
corporation, partnership, or association in which the contractor or 
responsible officers have an interest, shall be ineligible to be 
awarded any contract or subcontract subject to the Executive Order for 
a period of up to 3 years from the date of publication of the name of 
the contractor or responsible officer on the excluded parties list 
currently maintained on the System for Award Management Web site, 
http://www.SAM.gov. Neither an order of debarment of any contractor or 
its responsible officers from further Government contracts nor the 
inclusion of a contractor or its responsible officers on a published 
list of noncomplying contractors under this section shall be carried 
out without affording the contractor or responsible officers an 
opportunity for a hearing before an Administrative Law Judge.
    (e) Civil actions to recover greater underpayments than those 
withheld. If the payments withheld under Sec.  13.11(c) are 
insufficient to reimburse all monetary relief due, or if there are no 
payments to withhold, the Department of Labor, following a final order 
of the Secretary, may bring an action against the contractor in any 
court of competent jurisdiction to recover the remaining amount. The 
Department of Labor shall, to the extent possible, pay any sums it 
recovers in this manner directly to the employees who suffered the 
violation(s) of Sec.  13.6(a) or (b). Any sum not paid to an employee 
because of inability to do so within 3 years shall be transferred into 
the Treasury of the United States as miscellaneous receipts.
    (f) Retroactive inclusion of contract clause. If a contracting 
agency fails to include the applicable contract clause in a contract to 
which the Executive Order applies, the contracting agency, on its own 
initiative or within 15 calendar days of notification by an authorized 
representative of the Department of Labor, shall incorporate the 
contract clause in the contract retroactive to commencement of 
performance under the contract through the exercise of any and all 
authority that may be needed (including, where necessary, its authority 
to negotiate or amend, its authority to pay any necessary additional 
costs, and its authority under any contract provision authorizing 
changes, cancellation, and termination).

Subpart E--Administrative Proceedings


Sec.  13.51  Disputes concerning contractor compliance.

    (a) This section sets forth the procedures for resolution of 
disputes of fact or law concerning a contractor's compliance with this 
part. The procedures in this section may be initiated upon the 
Administrator's own motion or upon request of the contractor.
    (b)(1) In the event of a dispute described in paragraph (a) of this 
section in which it appears that relevant facts are at issue, the 
Administrator will notify the affected contractor(s) and the prime 
contractor (if different) of the investigative findings by certified 
mail to the last known address.
    (2) A contractor desiring a hearing concerning the Administrator's 
investigative findings letter shall request such a hearing by letter 
postmarked within 30 calendar days of the date of the Administrator's 
letter. The request shall set forth those findings that are in dispute 
with respect to the violations and/or debarment, as appropriate, 
explain how the findings are in dispute including by making reference 
to any affirmative defenses.
    (3) Upon receipt of a timely request for a hearing, the 
Administrator shall refer the case to the Chief

[[Page 67721]]

Administrative Law Judge by Order of Reference, to which shall be 
attached a copy of the investigative findings letter from the 
Administrator and response thereto, for designation to an 
Administrative Law Judge to conduct such hearings as may be necessary 
to resolve the disputed matters. The hearing shall be conducted in 
accordance with the procedures set forth in 29 CFR part 6.
    (c)(1) In the event of a dispute described in paragraph (a) of this 
section in which it appears that there are no relevant facts at issue, 
and where there is not at that time reasonable cause to institute 
debarment proceedings under Sec.  13.52, the Administrator shall notify 
the contractor(s) of the investigative findings by certified mail to 
the last known address, and shall issue a ruling in the investigative 
findings letter on any issues of law known to be in dispute.
    (2)(i) If the contractor disagrees with the factual findings of the 
Administrator or believes that there are relevant facts in dispute, the 
contractor shall so advise the Administrator by letter postmarked 
within 30 calendar days of the date of the Administrator's letter. In 
the response, the contractor shall explain in detail the facts alleged 
to be in dispute and attach any supporting documentation.
    (ii) Upon receipt of a timely response under paragraph (c)(2)(i) of 
this section alleging the existence of a factual dispute, the 
Administrator shall examine the information submitted. If the 
Administrator determines that there is a relevant issue of fact, the 
Administrator shall refer the case to the Chief Administrative Law 
Judge in accordance with paragraph (b)(3) of this section. If the 
Administrator determines that there is no relevant issue of fact, the 
Administrator shall so rule and advise the contractor accordingly.
    (3) If the contractor desires review of the ruling issued by the 
Administrator under paragraph (c)(1) or the final sentence of 
(c)(2)(ii) of this section, the contractor shall file a petition for 
review thereof with the Administrative Review Board postmarked within 
30 calendar days of the date of the ruling, with a copy thereof to the 
Administrator. The petition for review shall be filed in accordance 
with the procedures set forth in 29 CFR part 7.
    (d) If a timely response to the Administrator's investigative 
findings letter is not made or a timely petition for review is not 
filed, the Administrator's investigative findings letter shall become 
the final order of the Secretary. If a timely response or petition for 
review is filed, the Administrator's letter shall be inoperative unless 
and until the decision is upheld by an Administrative Law Judge or the 
Administrative Review Board or otherwise becomes a final order of the 
Secretary.


Sec.  13.52  Debarment proceedings.

    (a) Whenever any contractor is found by the Secretary of Labor to 
have disregarded its obligations to employees or subcontractors under 
Executive Order 13706 or this part, such contractor and its responsible 
officers, and any firm, corporation, partnership, or association in 
which such contractor or responsible officers have an interest, shall 
be ineligible for a period up to 3 years to receive any contracts or 
subcontracts subject to Executive Order 13706 from the date of 
publication of the name or names of the contractor or persons on the 
excluded parties list currently maintained on the System for Award 
Management Web site, http://www.SAM.gov.
    (b)(1) Whenever the Administrator finds reasonable cause to believe 
that a contractor has committed a violation of Executive Order 13706 or 
this part which constitutes a disregard of its obligations to employees 
or subcontractors, the Administrator shall notify by certified mail to 
the last known address or by personal delivery, the contractor and its 
responsible officers (and any firms, corporations, partnerships, or 
associations in which the contractor or responsible officers are known 
to have an interest), of the finding. The Administrator shall afford 
such contractor and any other parties notified an opportunity for a 
hearing as to whether debarment action should be taken under Executive 
Order 13706 or this part. The Administrator shall furnish to those 
notified a summary of the investigative findings. If the contractor or 
any other parties notified wish to request a hearing as to whether 
debarment action should be taken, such a request shall be made by 
letter to the Administrator postmarked within 30 calendar days of the 
date of the investigative findings letter from the Administrator, and 
shall set forth any findings which are in dispute and the reasons 
therefor, including any affirmative defenses to be raised. Upon receipt 
of such timely request for a hearing, the Administrator shall refer the 
case to the Chief Administrative Law Judge by Order of Reference, to 
which shall be attached a copy of the investigative findings letter 
from the Administrator and the response thereto, for designation of an 
Administrative Law Judge to conduct such hearings as may be necessary 
to determine the matters in dispute.
    (2) Hearings under this section shall be conducted in accordance 
with the procedures set forth in 29 CFR part 6. If no hearing is 
requested within 30 calendar days of the letter from the Administrator, 
the Administrator's findings shall become the final order of the 
Secretary.


Sec.  13.53  Referral to Chief Administrative Law Judge; amendment of 
pleadings.

    (a) Upon receipt of a timely request for a hearing under Sec.  
13.51 (where the Administrator has determined that relevant facts are 
in dispute) or Sec.  13.52 (debarment), the Administrator shall refer 
the case to the Chief Administrative Law Judge by Order of Reference, 
to which shall be attached a copy of the investigative findings letter 
from the Administrator and response thereto, for designation of an 
Administrative Law Judge to conduct such hearings as may be necessary 
to decide the disputed matters. A copy of the Order of Reference and 
attachments thereto shall be served upon the respondent. The 
investigative findings letter from the Administrator and response 
thereto shall be given the effect of a complaint and answer, 
respectively, for purposes of the administrative proceedings.
    (b) At any time prior to the closing of the hearing record, the 
complaint (investigative findings letter) or answer (response) may be 
amended with the permission of the Administrative Law Judge and upon 
such terms as the Administrative Law Judge may approve. For proceedings 
pursuant to Sec.  13.51, such an amendment may include a statement that 
debarment action is warranted under Sec.  13.52. Such amendments shall 
be allowed when justice and the presentation of the merits are served 
thereby, provided there is no prejudice to the objecting party's 
presentation on the merits. When issues not raised by the pleadings are 
reasonably within the scope of the original complaint and are tried by 
express or implied consent of the parties, they shall be treated in all 
respects as if they had been raised in the pleadings, and such 
amendments may be made as necessary to make them conform to the 
evidence. The presiding Administrative Law Judge may, upon reasonable 
notice and upon such terms as are just, permit supplemental pleadings 
setting forth transactions, occurrences, or events that have happened 
since the date of the pleadings and that are relevant to any of the 
issues involved. A continuance in the hearing may be granted or the 
record

[[Page 67722]]

left open to enable the new allegations to be addressed.


Sec.  13.54  Consent findings and order.

    (a) At any time prior to the receipt of evidence or, at the 
Administrative Law Judge's discretion prior to the issuance of the 
Administrative Law Judge's decision, the parties may enter into consent 
findings and an order disposing of the proceeding in whole or in part.
    (b) Any agreement containing consent findings and an order 
disposing of a proceeding in whole or in part shall also provide:
    (1) That the order shall have the same force and effect as an order 
made after full hearing;
    (2) That the entire record on which any order may be based shall 
consist solely of the Administrator's findings letter and the 
agreement;
    (3) A waiver of any further procedural steps before the 
Administrative Law Judge and the Administrative Review Board regarding 
those matters which are the subject of the agreement; and
    (4) A waiver of any right to challenge or contest the validity of 
the findings and order entered into in accordance with the agreement.
    (c) Within 30 calendar days after receipt of an agreement 
containing consent findings and an order disposing of the disputed 
matter in whole, the Administrative Law Judge shall, if satisfied with 
its form and substance, accept such agreement by issuing a decision 
based upon the agreed findings and order. If such agreement disposes of 
only a part of the disputed matter, a hearing shall be conducted on the 
matters remaining in dispute.


Sec.  13.55  Administrative Law Judge proceedings.

    (a) Jurisdiction. The Office of Administrative Law Judges has 
jurisdiction to hear and decide appeals concerning questions of law and 
fact from the Administrator's investigative findings letters issued 
under Sec. Sec.  13.51 and 13.52.
    (b) Proposed findings of fact, conclusions, and order. Within 20 
calendar days of filing of the transcript of the testimony or such 
additional time as the Administrative Law Judge may allow, each party 
may file with the Administrative Law Judge proposed findings of fact, 
conclusions of law, and a proposed order, together with a supporting 
brief expressing the reasons for such proposals. Each party shall serve 
such proposals and brief on all other parties.
    (c) Decision. (1) Within a reasonable period of time after the time 
allowed for filing of proposed findings of fact, conclusions of law, 
and order, or within 30 calendar days of receipt of an agreement 
containing consent findings and order disposing of the disputed matter 
in whole, the Administrative Law Judge shall issue a decision. The 
decision shall contain appropriate findings, conclusions, and an order, 
and be served upon all parties to the proceeding.
    (2) If the respondent is found to have violated Executive Order 
13706 or this part, and if the Administrator requested debarment, the 
Administrative Law Judge shall issue an order as to whether the 
respondent is to be subject to the excluded parties list, including 
findings that the contractor disregarded its obligations to employees 
or subcontractors under the Executive Order or this part.
    (d) Limit on scope of review. The Equal Access to Justice Act, as 
amended, does not apply to proceedings under this part. Accordingly, 
Administrative Law Judges shall have no authority to award attorney's 
fees and/or other litigation expenses pursuant to the provisions of the 
Equal Access to Justice Act for any proceeding under this part.
    (e) Orders. If the Administrative Law Judge concludes a violation 
occurred, the final order shall mandate action to remedy the violation, 
including any monetary or equitable relief described in Sec.  13.44. 
Where the Administrator has sought imposition of debarment, the 
Administrative Law Judge shall determine whether an order imposing 
debarment is appropriate.
    (f) Finality. The Administrative Law Judge's decision shall become 
the final order of the Secretary, unless a timely petition for review 
is filed with the Administrative Review Board.


Sec.  13.56  Petition for review.

    (a) Filing. Within 30 calendar days after the date of the decision 
of the Administrative Law Judge (or such additional time as is granted 
by the Administrative Review Board), any party aggrieved thereby who 
desires review thereof shall file a petition for review of the decision 
with supporting reasons. Such party shall transmit the petition in 
writing to the Administrative Review Board with a copy thereof to the 
Chief Administrative Law Judge. The petition shall refer to the 
specific findings of fact, conclusions of law, or order at issue. A 
petition concerning the decision on debarment shall also state the 
disregard of obligations to employees and/or subcontractors, or lack 
thereof, as appropriate. A party must serve the petition for review, 
and all briefs, on all parties and the Chief Administrative Law Judge. 
It must also timely serve copies of the petition and all briefs on the 
Administrator, Wage and Hour Division, and on the Associate Solicitor, 
Division of Fair Labor Standards, Office of the Solicitor, U.S. 
Department of Labor, Washington, DC 20210.
    (b) Effect of filing. If a party files a timely petition for 
review, the Administrative Law Judge's decision shall be inoperative 
unless and until the Administrative Review Board issues an order 
affirming the decision, or the decision otherwise becomes a final order 
of the Secretary. If a petition for review concerns only the imposition 
of debarment, however, the remainder of the decision shall be effective 
immediately. No judicial review shall be available unless a timely 
petition for review to the Administrative Review Board is first filed.


Sec.  13.57  Administrative Review Board proceedings.

    (a) Authority--(1) General. The Administrative Review Board has 
jurisdiction to hear and decide in its discretion appeals concerning 
questions of law and fact from investigative findings letters of the 
Administrator issued under Sec.  13.51(c)(1) or the final sentence of 
Sec.  13.51(c)(2)(ii), Administrator's rulings issued under Sec.  
13.58, and decisions of Administrative Law Judges issued under Sec.  
13.55. In considering the matters within the scope of its jurisdiction, 
the Administrative Review Board shall act as the authorized 
representative of the Secretary and shall act fully and finally on 
behalf of the Secretary concerning such matters.
    (2) Limit on scope of review. (i) The Administrative Review Board 
shall not have jurisdiction to pass on the validity of any provision of 
this part. The Administrative Review Board is an appellate body and 
shall decide cases properly before it on the basis of substantial 
evidence contained in the entire record before it. The Administrative 
Review Board shall not receive new evidence into the record.
    (ii) The Equal Access to Justice Act, as amended, does not apply to 
proceedings under this part. Accordingly, the Administrative Review 
Board shall have no authority to award attorney's fees and/or other 
litigation expenses pursuant to the provisions of the Equal Access to 
Justice Act for any proceeding under this part.
    (b) Decisions. The Administrative Review Board's final decision 
shall be issued within a reasonable period of time following receipt of 
the petition for review and shall be served upon all

[[Page 67723]]

parties by mail to the last known address and on the Chief 
Administrative Law Judge (in cases involving an appeal from an 
Administrative Law Judge's decision).
    (c) Orders. If the Administrative Review Board concludes a 
violation occurred, the final order shall mandate action to remedy the 
violation, including, but not limited to, any monetary or equitable 
relief described in Sec.  13.44. Where the Administrator has sought 
imposition of debarment, the Administrative Review Board shall 
determine whether an order imposing debarment is appropriate.
    (d) Finality. The decision of the Administrative Review Board shall 
become the final order of the Secretary.


Sec.  13.58  Administrator ruling.

    (a) Questions regarding the application and interpretation of the 
rules contained in this part may be referred to the Administrator, who 
shall issue an appropriate ruling. Requests for such rulings should be 
addressed to the Administrator, Wage and Hour Division, U.S. Department 
of Labor, Washington, DC 20210.
    (b) Any interested party may appeal to the Administrative Review 
Board for review of a final ruling of the Administrator issued under 
paragraph (a) of this section. The petition for review shall be filed 
with the Administrative Review Board within 30 calendar days of the 
date of the ruling.

Appendix A to Part 13--Contract Clause

    The following clause shall be included by the contracting agency 
in every contract, contract-like instrument, and solicitation to 
which Executive Order 13706 applies, except for procurement 
contracts subject to the Federal Acquisition Regulation (FAR):
    (a) Executive Order 13706. This contract is subject to Executive 
Order 13706, the regulations issued by the Secretary of Labor in 29 
CFR part 13 pursuant to the Executive Order, and the following 
provisions.
    (b) Paid Sick Leave. (1) The contractor shall permit each 
employee (as defined in 29 CFR 13.2) engaged in the performance of 
this contract by the prime contractor or any subcontractor, 
regardless of any contractual relationship that may be alleged to 
exist between the contractor and employee, to earn not less than 1 
hour of paid sick leave for every 30 hours worked. The contractor 
shall additionally allow accrual and use of paid sick leave as 
required by Executive Order 13706 and 29 CFR part 13. The contractor 
shall in particular comply with the accrual, use, and other 
requirements set forth in 29 CFR 13.5 and 13.6, which are 
incorporated by reference in this contract.
    (2) The contractor shall provide paid sick leave to all 
employees when due free and clear and without subsequent deduction 
(except as otherwise provided by 29 CFR 13.24), rebate, or kickback 
on any account. The contractor shall provide pay and benefits for 
paid sick leave used no later than one pay period following the end 
of the regular pay period in which the paid sick leave was taken.
    (3) The prime contractor and any upper-tier subcontractor shall 
be responsible for the compliance by any subcontractor or lower-tier 
subcontractor with the requirements of Executive Order 13706, 29 CFR 
part 13, and this clause.
    (c) Withholding. The contracting officer shall, upon its own 
action or upon written request of an authorized representative of 
the Department of Labor, withhold or cause to be withheld from the 
prime contractor under this or any other Federal contract with the 
same prime contractor, so much of the accrued payments or advances 
as may be considered necessary to pay employees the full amount owed 
to compensate for any violation of the requirements of Executive 
Order 13706, 29 CFR part 13, or this clause, including any pay and/
or benefits denied or lost by reason of the violation; other actual 
monetary losses sustained as a direct result of the violation, and 
liquidated damages.
    (d) Contract Suspension/Contract Termination/Contractor 
Debarment. In the event of a failure to comply with Executive Order 
13706, 29 CFR part 13, or this clause, the contracting agency may on 
its own action or after authorization or by direction of the 
Department of Labor and written notification to the contractor, take 
action to cause suspension of any further payment, advance, or 
guarantee of funds until such violations have ceased. Additionally, 
any failure to comply with the requirements of this clause may be 
grounds for termination of the right to proceed with the contract 
work. In such event, the Government may enter into other contracts 
or arrangements for completion of the work, charging the contractor 
in default with any additional cost. A breach of the contract clause 
may be grounds for debarment as a contractor and subcontractor as 
provided in 29 CFR 13.52.
    (e) The paid sick leave required by Executive Order 13706, 29 
CFR part 13, and this clause is in addition to a contractor's 
obligations under the Service Contract Act and Davis-Bacon Act, and 
a contractor may not receive credit toward its prevailing wage or 
fringe benefit obligations under those Acts for any paid sick leave 
provided in satisfaction of the requirements of Executive Order 
13706 and 29 CFR part 13.
    (f) Nothing in Executive Order 13706 or 29 CFR part 13 shall 
excuse noncompliance with or supersede any applicable Federal or 
State law, any applicable law or municipal ordinance, or a 
collective bargaining agreement requiring greater paid sick leave or 
leave rights than those established under Executive Order 13706 and 
29 CFR part 13.
    (g) Recordkeeping. (1) Any contractor performing work subject to 
Executive Order 13706 and 29 CFR part 13 must make and maintain, for 
no less than three (3) years from the completion of the work on the 
contract, records containing the information specified in paragraphs 
(i) through (xv) of this section for each employee and shall make 
them available for inspection, copying, and transcription by 
authorized representatives of the Wage and Hour Division of the U.S. 
Department of Labor:
    (i) Name, address, and Social Security number of each employee;
    (ii) The employee's occupation(s) or classification(s);
    (iii) The rate or rates of wages paid (including all pay and 
benefits provided);
    (iv) The number of daily and weekly hours worked;
    (v) Any deductions made;
    (vi) The total wages paid (including all pay and benefits 
provided) each pay period;
    (vii) A copy of notifications to employees of the amount of paid 
sick leave the employee has accrued, as required under 29 CFR 
13.5(a)(2);
    (viii) A copy of employees' requests to use paid sick leave, if 
in writing, or, if not in writing, any other records reflecting such 
employee requests;
    (ix) Dates and amounts of paid sick leave taken by employees 
(unless a contractor's paid time off policy satisfies the 
requirements of Executive Order 13706 and 29 CFR part 13 as 
described in Sec.  13.5(f)(5), leave must be designated in records 
as paid sick leave pursuant to Executive Order 13706);
    (x) A copy of any written responses to employees' requests to 
use paid sick leave, including explanations for any denials of such 
requests, as required under 29 CFR 13.5(d)(3);
    (xi) Any records reflecting the certification and documentation 
a contractor may require an employee to provide under 29 CFR 
13.5(e), including copies of any certification or documentation 
provided by an employee;
    (xii) Any other records showing any tracking of or calculations 
related to an employee's accrual or use of paid sick leave;
    (xiii) The relevant covered contract;
    (xiv) The regular pay and benefits provided to an employee for 
each use of paid sick leave; and
    (xv) Any financial payment made for unused paid sick leave upon 
a separation from employment intended, pursuant to 29 CFR 
13.5(b)(5), to relieve a contractor from the obligation to reinstate 
such paid sick leave as otherwise required by 29 CFR 13.5(b)(4).
    (2)(i) If a contractor wishes to distinguish between an 
employee's covered and non-covered work, the contractor must keep 
records or other proof reflecting such distinctions. Only if the 
contractor adequately segregates the employee's time will time spent 
on non-covered work be excluded from hours worked counted toward the 
accrual of paid sick leave. Similarly, only if that contractor 
adequately segregates the employee's time may a contractor properly 
refuse an employee's request to use paid sick leave on the ground 
that the employee was scheduled to perform non-covered work during 
the time she asked to use paid sick leave.
    (ii) If a contractor estimates covered hours worked by an 
employee who performs work in connection with covered contracts 
pursuant to 29 CFR 13.5(a)(i) or (iii), the contractor must keep 
records or other proof of the verifiable information on which such

[[Page 67724]]

estimates are reasonably based. Only if the contractor relies on an 
estimate that is reasonable and based on verifiable information will 
an employee's time spent in connection with non-covered work be 
excluded from hours worked counted toward the accrual of paid sick 
leave. If a contractor estimates the amount of time an employee 
spends performing in connection with covered contracts, the 
contractor must permit the employee to use her paid sick leave 
during any work time for the contractor.
    (3) In the event a contractor is not obligated by the Service 
Contract Act, the Davis-Bacon Act, or the Fair Labor Standards Act 
to keep records of an employee's hours worked, such as because the 
employee is exempt from the FLSA's minimum wage and overtime 
requirements, and the contractor chooses to use the assumption 
permitted by 29 CFR 13.5(a)(1)(iii), the contractor is excused from 
the requirement in paragraph (1)(d) of this section to keep records 
of the employee's number of daily and weekly hours worked.
    (4)(i) Records relating to medical histories or domestic 
violence, sexual assault, or stalking, created for purposes of 
Executive Order 13706, whether of an employee or an employee's 
child, parent, spouse, domestic partner, or other individual related 
by blood or affinity whose close association with the employee is 
the equivalent of a family relationship, shall be maintained as 
confidential records in separate files/records from the usual 
personnel files.
    (ii) If the confidentiality requirements of the Genetic 
Information Nondiscrimination Act of 2008 (GINA), section 503 of the 
Rehabilitation Act of 1973, and/or the Americans with Disabilities 
Act (ADA) apply to records or documents created to comply with the 
recordkeeping requirements in this contract clause, the records and 
documents must also be maintained in compliance with the 
confidentiality requirements of the GINA, section 503 of the 
Rehabilitation Act of 1973, and/or ADA as described in 29 CFR 
1635.9, 41 CFR 60-741.23(d), and 29 CFR 1630.14(c)(1), respectively.
    (iii) The contractor shall not disclose any documentation used 
to verify the need to use 3 or more consecutive days of paid sick 
leave for the purposes listed in 29 CFR 13.5(c)(1)(iv) (as described 
in 29 CFR 13.5(e)(1)(ii)) and shall maintain confidentiality about 
any domestic abuse, sexual assault, or stalking, unless the employee 
consents or when disclosure is required by law.
    (5) The contractor shall permit authorized representatives of 
the Wage and Hour Division to conduct interviews with employees at 
the worksite during normal working hours.
    (6) Nothing in this contract clause limits or otherwise modifies 
the contractor's recordkeeping obligations, if any, under the Davis-
Bacon Act, the Service Contract Act, the Fair Labor Standards Act, 
the Family and Medical Leave Act, Executive Order 13658, their 
respective implementing regulations, or any other applicable law.
    (h) The contractor (as defined in 29 CFR 13.2) shall insert this 
clause in all of its covered subcontracts and shall require its 
subcontractors to include this clause in any covered lower-tier 
subcontracts.
    (i) Certification of Eligibility. (1) By entering into this 
contract, the contractor (and officials thereof) certifies that 
neither it (nor he or she) nor any person or firm who has an 
interest in the contractor's firm is a person or firm ineligible to 
be awarded Government contracts by virtue of the sanctions imposed 
pursuant to section 5 of the Service Contract Act, section 3(a) of 
the Davis-Bacon Act, or 29 CFR 5.12(a)(1).
    (2) No part of this contract shall be subcontracted to any 
person or firm whose name appears on the list of persons or firms 
ineligible to receive Federal contracts currently maintained on the 
System for Award Management Web site, http://www.SAM.gov.
    (3) The penalty for making false statements is prescribed in the 
U.S. Criminal Code, 18 U.S.C. 1001.
    (j) Interference/Discrimination. (1) A contractor may not in any 
manner interfere with an employee's accrual or use of paid sick 
leave as required by Executive Order 13706 or 29 CFR part 13. 
Interference includes, but is not limited to, miscalculating the 
amount of paid sick leave an employee has accrued, denying or 
unreasonably delaying a response to a proper request to use paid 
sick leave, discouraging an employee from using paid sick leave, 
reducing an employee's accrued paid sick leave by more than the 
amount of such leave used, transferring an employee to work on non-
covered contracts to prevent the accrual or use of paid sick leave, 
disclosing confidential information contained in certification or 
other documentation provided to verify the need to use paid sick 
leave, or making the use of paid sick leave contingent on the 
employee's finding a replacement worker or the fulfillment of the 
contractor's operational needs.
    (2) A contractor may not discharge or in any other manner 
discriminate against any employee for:
    (i) Using, or attempting to use, paid sick leave as provided for 
under Executive Order 13706 and 29 CFR part 13;
    (ii) Filing any complaint, initiating any proceeding, or 
otherwise asserting any right or claim under Executive Order 13706 
and 29 CFR part 13;
    (iii) Cooperating in any investigation or testifying in any 
proceeding under Executive Order 13706 and 29 CFR part 13; or
    (iv) Informing any other person about his or her rights under 
Executive Order 13706 and 29 CFR part 13.
    (k) Waiver. Employees cannot waive, nor may contractors induce 
employees to waive, their rights under Executive Order 13706, 29 CFR 
part 13, or this clause.
    (l) Notice. The contractor must notify all employees performing 
work on or in connection with a covered contract of the paid sick 
leave requirements of Executive Order 13706, 29 CFR part 13, and 
this clause by posting a notice provided by the Department of Labor 
in a prominent and accessible place at the worksite so it may be 
readily seen by employees. Contractors that customarily post notices 
to employees electronically may post the notice electronically, 
provided such electronic posting is displayed prominently on any Web 
site that is maintained by the contractor, whether external or 
internal, and customarily used for notices to employees about terms 
and conditions of employment.
    (m) Disputes concerning labor standards. Disputes related to the 
application of Executive Order 13706 to this contract shall not be 
subject to the general disputes clause of the contract. Such 
disputes shall be resolved in accordance with the procedures of the 
Department of Labor set forth in 29 CFR part 13. Disputes within the 
meaning of this contract clause include disputes between the 
contractor (or any of its subcontractors) and the contracting 
agency, the U.S. Department of Labor, or the employees or their 
representatives.

[FR Doc. 2016-22964 Filed 9-29-16; 8:45 am]
 BILLING CODE 4510-27-P